Mutual Funds are one of the oldest products traded in the market. Mutual Funds eliminate the basic two limitations of Indian investors, viz; lack of big money and lack of knowledge regarding the price movements
Mutual funds are investment companies that use the funds from investors to invest in other companies or investment alternatives. They have the advantage of professional management, diversification, convenience, and special services such as cheque writing and telephone account service.
Mutual funds come in various types, allowing you to choose those funds with objectives, which most closely match your own personal investment objectives. All funds have annual management fees attached. Mutual Fund Schemes may be classified on the Basis of its Structure and its Investment Objective.
TYPES OF MUTUAL FUND SCHEMES
There are mainly two types of mutual fund schemes, they are explained in detailed way below.
01. OPEN-ENDED MUTUAL FUNDS
An open-ended mutual fund is the one whose units can be freely sold and repurchased by the investors. Such funds are not listed on bourses since the Asset Management Companies (AMCs) provide the facility for buyback of units from unit-holders either at the NAV or NAV-linked prices. Instant liquidity is the Unique Selling Proposition of open-ended funds you can invest in or redeem your units at will in a matter of 2-3 days.
02. CLOSED-ENDED MUTUAL FUNDS
Closed-ended mutual funds have a fixed number of units, and a fixed tenure (3, 5, 10, or 15 years), after which their units are redeemed or they are made open-ended. These funds have various objectives: generating steady income by investing in debt instruments, capital appreciation by investing in equities, or both by making an equal allocation of the corpus in debt and equity instruments.