Introduction
In my previous articles I have explained about the mutual funds and few concepts in the mutual funds like entry load and SIP. In this article I will explain about the open ended and close ended schemes. If you like the article, get the free email updates.
What is Open Ended Mutual Funds?
Open–ended schemes usually do not have a fixed maturity period and are available for subscription and redemption on an ongoing basis. The units can be bought and sold any time during the life of the scheme at NAV related prices. When you are selling the units, there is certain amount will be deducted as the exit load.
What is Close Ended Mutual Funds?
Close ended funds are Equity Linked Savings Scheme(ELSS) where you can not sell the units with in the three years period. These funds are issued only at the time of New Fund Offer(NFO). You acn not buy the units in the open market. That means your investment has the lock in period of three years.
Summary
I hope this article would be useful for the readers to know about the mutual funds. Thank you for reading this article. If you have any doubts, please post it in the comments section.
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January 17, 2010 at 10:58 am
The information mentioned about Closed Ended Mutual Funds is not completely correct. Not all the closed ended MFs can only be ELSS Funds. The duration how long a fund remains closed ended depends upon the fund itself. There are some funds, which are closed ended and the duration for which your amount will remain blocked varies between 5 to 10 years (e.g. Kotak Infrastucture Fund, Religare Infrastructure Fund etc). Also if a fund management company undergoes any kind of take-over merger then investors are given an option to withdraw their money for these closed ended funds.
January 20, 2010 at 2:48 pm
Good stuff!!! found it really informative!!!
January 20, 2010 at 7:28 pm
Hello Anu,
Thank you for the comments!!
Thanks,
Krishna
March 7, 2010 at 11:50 am
could you explain the exit load briefly?
how the percentage varies in case of exit load?