Lesson #4: Open-End & Closed-End Funds
Start Your SIP in Mutual Funds.
Mutual Funds are based on two different types, Open-Ended Mutual Funds & Closed-Ended Mutual Funds.
In this lesson, We will understand both of them and which you should prefer for your investment needs.
Page Contents
Open-End Funds
Open-End Mutual Funds allows you the flexibility to invest and withdraw your money anytime from these funds as they are perpetually open.
Except for the ELSS Category (Tax Saver Funds) where there is an initial lock-in of 3 years, but the funds are open-ended only as they are perpetually open for investments.
Closed-End Funds
Closed-End Mutual Funds are locked in for a specified period of time, which means you can invest in these funds only at the time of its NFO and for the specified period.
You are not allowed to withdraw money from these funds before the date of maturity of close-ended funds.
However, closed-end funds are listed on a stock exchange so that you can sell and exit your investment by selling its units, but they normally trade at discounts.
Conclusion
From an investment point of view, you should not prefer closed-ended funds because they don’t allow the flexibility to exit in cases of non-performance.
However, open-ended funds provide you the flexibility to exit for any reason, as Liquidity is one of the major advantages of investments in Mutual Funds and only open-ended funds provide you that at fair and prevailing prices.
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End of Lesson #4, Click here for Full Course.
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Hi, I’m Managing Director at Gurpreet Saluja Financial Services where I help my investors to invest in mutual funds and achieve their financial goals. I’m also a Value Investor and here I write about Personal Finance & Investing.
