Mutual fund and its types (open-ended and close-ended )

Mutual fund 

Mutual fund is a fund created and maintain by company that pools in money from many investors and invest the accumulated money in stock on short term money market instrument other security is or some combination of these investments the holding that mutual fund on are called as its portfolio each or unit represent and investors proportionate ownership of funds holding and the income these holdings generate. (More)

Open ended Mutual  fund

In case of an open ended scheme the period of redemption is not specified. These scheme do not have a fixed maturity period. And invester can buy a cell unit on daily basis. 

The price of sales or purchase of unit is linked to net asset value of the units. These schemes have limited capitalisation and do not have a fixed maturity. There is no cap on the amount you can buy from the fund and the unit capital can keep growing such funds provide instant liquidity to the investor they are not listed on any stock exchange rather they are transacted by mutual fund themselves.

Features of open ended mutual fund

• Open-ended mutual funds combine the funds of many participants to invest in a variety of assets, providing diversity across different asset classes and lowering individual risk.

• Compared to closed-ended funds, open-ended mutual funds have higher liquidity since investors can buy or sell units at any moment during market hours at the current net asset value (NAV).

• Because these funds don't have a set maturity date, investors can enter or quit the fund whenever it's convenient for them, with no time limits on their investment.

• Open-ended mutual funds are professionally managed by knowledgeable fund managers that base their investment choices on market analysis and the fund's purpose in order to maximise profits for investors.

Close ended Mutual Fund 

In case of close ended scheme the subscription period is specified the investors are permitted to invest in the scheme by purchase of units up to the specified dates on the expiry of the subsection period the Corpus of one is invested in security and the unit of this scheme are listed on the stock exchange to provide liquidity to the investors there for close and then mutual fund are more like equity shares the market price of the unit could very from the net asset value of the scheme due to demand and supply factors investor expectations and other market factor.

Some of the features of close ended mutual fund:

• Fixed number of units: During their first offering, close-ended mutual funds issue a set number of units; no further units are produced after that.

• Limited time: These funds are repaid on a set day, usually after a specified number of years, known as their maturity date.

• Close-ended mutual fund units are listed on exchanges, where buyers and sellers can transact at market rates throughout the duration of the fund.

• Professional fund managers oversee the management of close-ended funds, just as they do with open-ended ones. These managers choose investments on the clients' behalf.

• Fixed portfolio: The fund's portfolio is predefined and stays the same for the duration of its existence, giving investors visibility into the underlying assets.