Could you please tell me what is the difference between close ended and open ended mutual funds?
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Could you please tell me what is the difference between close ended and open ended mutual funds?
Example -Quote:
Originally Posted by Sharma
An open ended and a close ended fund, both will be open for subscription which is called a new fund offer or NFO. 1st Jan'2010 to 31st Jan'2010.
In case of close ended fund, after 31st Jan 2010 - one cannot subscribe to this fund anymore.
In case of open ended fund, on 1st Feb 2010 the first N.A.V. comes out publicly and is open for subscription again at the newly calculated N.A.V which is done on daily basis.
So the funds collected by close ended fund remain fixed after subscription offer is over and they have a fixed tenure say 3 years/ 5 years and so on.
While in an open ended fund, new investors can come in and old investors can exit at any point of time.
MFs FAQ - http://www.policywala.com/showthread...on-Mutual-Fund
Quote:
Open-ended Fund/ Scheme
An open-ended fund or scheme is one that is available for subscription and repurchase on a continuous basis. These schemes do not have a fixed maturity period. Investors can conveniently buy and sell units at Net Asset Value (NAV) related prices which are declared on a daily basis. The key feature of open-end schemes is liquidity.
Close-ended Fund/ Scheme
A close-ended fund or scheme has a stipulated maturity period e.g. 5-7 years. The fund is open for subscription only during a specified period at the time of launch of the scheme. Investors can invest in the scheme at the time of the initial public issue and thereafter they can buy or sell the units of the scheme on the stock exchanges where the units are listed. In order to provide an exit route to the investors, some close-ended funds give an option of selling back the units to the mutual fund through periodic repurchase at NAV related prices. SEBI Regulations stipulate that at least one of the two exit routes is provided to the investor i.e. either repurchase facility or through listing on stock exchanges. These mutual funds schemes disclose NAV generally on weekly basis.