5 Replies to “I like to invest in Mutual Fund, what is “close-ended equity scheme”? what is “open end”?”

  1. open ended u can invest any time and redeem anytime
    close ended can be purchased only during launch and locked for three years, if u want to redeem before 3 years they wil charge u upto 6 percent as exit load depending upon which year u r reedeming before 3 years,

  2. A “closed-end fund” is a collective investment scheme with a limited number of shares. No additional shares will be offered to investors.

    An “open end fund” can offer more shares to investors.

  3. Open ended schemes are ones where you can buy and sell units any time, though tax treatment of your gains differ whether you have stayed invested for one year or more. On the other hand close ended schemes can be bought only during New Fund Offer (NFO) period and generally have to remain invested for three years. Depending upon your goal, its best to choose a good fund house and a fund with good track record rather than buying units at par during the NFO.

  4. Open-ended schemes

    Open-ended schemes do not have a fixed maturity period. Investors can buy or sell units at NAV-related prices from and to the mutual fund on any business day. These schemes have unlimited capitalization, open-ended schemes 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. These funds are not generally listed on any exchange.

    Open-ended schemes are preferred for their liquidity. Such funds can issue and redeem units any time during the life of a scheme. Hence, unit capital of open-ended funds can fluctuate on a daily basis. The advantages of open-ended funds over close-ended are as follows:

    Any time exit option, The issuing company directly takes the responsibility of providing an entry and an exit. This provides ready liquidity to the investors and avoids reliance on transfer deeds, signature verifications and bad deliveries. Any time entry option, An open-ended fund allows one to enter the fund at any time and even to invest at regular intervals.

    Close ended schemes

    Close-ended schemes have fixed maturity periods. Investors can buy into these funds during the period when these funds are open in the initial issue. After that such schemes can not issue new units except in case of bonus or rights issue. However, after the initial issue, you can buy or sell units of the scheme on the stock exchanges where they are listed. The market price of the units could vary from the NAV of the scheme due to demand and supply factors, investors’ expectations and other market factors

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