Closed End and Open End Mutual Fund schemes
Mutual funds can be classified under two categories based on the method of investment options provided to investors. They are
a. Closed End Funds and
b. Open End Funds.
A. Closed End Mutual Fund scheme.
The features of a Closed Fund Mutual Fund are:
i. They collect the investible amount from the investors during a specific period
ii. The amount for investment is collected through a New Fund Offer (NFO).
iii. NFO will be open only for a few days, announced by the mutual Fund.
iv. The fund operates for a specified period ranging between say, 3 to 15 years.
v. The quantum raised will be divided into fixed number of units.
vi. The number of units in a closed fund will remain unchanged through out the life of the fund.
vii. Closed end funds are normally listed on stock exchanges
viii. Existing investors can off load and new investors can purchase units through stock exchange.
ix. The mutual Fund announces redemption dates during which also investors can redeem the units.
x. The value of the units will undergo changes depending on the value of underlying securities in which the scheme has invested.
B. Open End Mutual Fund Schemes
i. An Open-End Fund scheme is available through out the year for subscription
ii. The units can be purchased at the prevailing Net Asset Value (NAV).
iii. Open End Mutual Fund Schemes are not listed in stock exchanges.
iv. Investors can buy or sell units at any time at a value linked to the Net Asset Value (NAV) on the day.
v. The scheme does not have a specific maturity date.
