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Open Ended Mutual Funds
What are Open-ended Mutual Fund Schemes?
Open-ended Mutual Fund Schemes is one of the types of Mutual Funds in India. An Open-ended Mutual Fund does not restrict itself to a given set of number for the shares. In other words, the number of shares remains non-confined and thereby technically it serves as an open ended instrument. A majority of the Mutual Funds in India are open-ended. The Open-ended Mutual Fund Schemes in India are more common than the closed-ended Mutual Fund Schemes.
Features of Open-ended Mutual Fund
These are the following characteristics of the Indian open-ended Mutual Funds:
- This type of fund permits the investors to purchase the shares or sell the shares directly, any time.
- Based on the current NAV (Net Asset Value), this type of fund issues fresh shares to the investors and redeem them once the investor makes a decision to sell the shares.
- The open-ended Indian mutual fund schemes have high liquidity as the investors can put and take out their many as and when they require.
- The total assets of the open-ended Mutual Fund fluctuate with the in and out flow of money.
- The fund can issue limitless shares and individual share value remains unaffected by the shares outstanding.
- The net asset value (NAV) of the fund determines the value of each share.
Benefits of Open-ended Mutual Fund Schemes in India
Open ended Mutual Funds provide a number of benefits which are as follows:
- These funds maintain a lot of flexibility. This is to say that one can draw your money out any point of time.
- The funds can be diversified under the various kinds of investment opportunities. This way you can reap the fruits of different investment options.
- Most of the open mutual funds do not charge any fees while transferring various funds within the same family.
Risks of Open-ended Mutual Fund
There are also some risks involved with the open-ended Mutual Fund, which are as follows:
- The returns are affected when sudden redemptions result in a decline in the value of portfolio.
- The fund returns may also get affected by the various types of market forces.
- Open ended Mutual Funds cannot be traded in the stock market.
Advantages of Open ended Mutual Fund
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