6 Replies to “Which is better close ended or open ended fund,which of these two will bring more profit?”

  1. Neither one is ‘better’ as a general rule.

    Closed-end funds means that there are a fixed number of shares, so that after the IPO, if you want to buy shares, you are buying from someone who owns shares, just like stocks. Closed-end funds are a small minority of mutual funds.

    Open-end funds — the majority of mutual funds — don’t have a fixed number of shares, so if you want to buy in, the total amount of shares increases, and when you sell, decreases.

    One advantage of closed-end funds is that they never have to liquidate securities in a hurry because people are leaving the fund.

    One disadvantage of closed-end funds is that after the IPO, they quite often sell at a discount to the net asset value and that discount can persist for years. On the other hand, picking up closed-end fund shares when the discount is higher than usual can prove profitable in the long-term.

    Another disadvantage of closed-end funds is that they are much harder to find good information on. Many of the good web sites for helping you choose mutual funds only cover open-end and not closed-end funds.

  2. Profit does not depend upon the closed or open ended schemes.
    If you invest in closed ended scheme, you can’t exit from it till the scheme becomes open ended ( 3 years). In such funds you have to invest at the time of NFO. If the scheme is 3 years closed ended, you can’t invest in it till further three years (after NFO).
    Open ended schemes are open to enter or exit at any time.
    Their returns are as per the market and the portfolio the fund manager has prepared.

  3. If you have spare money & wait for a growth then close ended are bettr. As in close ended fund , you can not withdraw any time you want( can only withdraw at a definite dates), it gives fund manager a flexibility to invest & he can remain free from redemption pressure most of the time in year. This helps in NAV building.

    Open ended fund generallyface redemption pressure if market go down. It forces Fund manager to sit on cash too.

    Charges in close ended fund are high.

  4. Both these are not liquid funds.But the open ended can b liquified any time,thats a benefit.
    But each Indian should realize now that his/her money should work as hard as him/her.
    So..dont invest in other’s business,,start something of ur own and get the 100% of the profit from ur investment.


  5. There is obviously no easy answers both have there own merrits..

    The mutual fund comes with an IPO and later it starts declaring NAV based on the assets that it is managing, e.g. a equity fund would caculate NAV based on its underlying market value of the securities it is holding, with market fluctating NAV will fluctuate. An open ended fund, is the where in you can either buy or sell the fund based prevailing markets (with costs such as entry or exit load) as per the rules of the fund in question.
    On the cotrary the close ended fund generally is for specified period during this period you can not buy or sell the fund.

    Open ended fund provides liquidity. On the other close ended fund fund do not provide liquidity, but the fund manager can take long term view and hence possible benefiet to investor in long term.

    Let us say market is down due to panic news, and if the mutual fund manager feels its right time to buy with long term horizon, but open-ended MF manger cant do so, this is exat time when investors flock and have no money to invest on the contrary to meet liquidity requirement he has to sell.
    Open ended funds always have to fight the liquidity issue. generally larger fund size manage this better with size.

    The answer depends on your investment objective, need of liquidity etc.

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