What are Open Ended and Close Ended Fund?

When I entered the Mutual Fund, I did not know what was the Open Ended and Close Ended Fund? Which of us should we take in . So let us see what is Open Ended and Close Ended Fund.

Open Ended Fund

  • By listening to Open Ended, you understand that it will be openly used. Here you will be able to invest money and buy a unit whenever you want. Once again the mind will be able to withdraw the money by selling the unit.
  • When you invest money in the fund, on the day that the NAV (Net Asset Value) will run, you will be given the unit based on NAV ∴ Unit = Investment Amount ÷ NAV
  • According to NAV of the day, you will receive your money by selling. ∴ Withdrawal amount = NAV × Unit
  • You do not have any maturity period here.
  • But from here any time the investor can not withdraw the money, because some fund sets 1% charge, if the fund sells it 1 year ago.

Close Ended Fund

  • By listening to the Close Ended Fund, it is understood that it will be used closely. Here you can buy a specific unit once, when a fund house releases their NFO (New Fund Offer), then you can apply only for the purchase. Can not be bought after the specified time limit.
  • There are maturity period is present in this fund. This means that you can not exit before maturity period once entered.
  • But yes there is a way out of this Close Ended Fund. If that fund house lists those funds on the stock exchange then you will get the buyers there, which you can sell and can come out the fund. That means your fund will be transferred only to him.

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