What are Open Ended Mutual Funds? Features and Benefits

OPEN ENDED MUTUAL FUND – Today we will try to understand OPEN ENDED MUTUAL FUND in this topic, and know what is open ended mutual fund? What are the special features of OPEN ENDED MUTUAL FUND and what are the benefits of investing in it?

Any mutual fund is of two types according to its structure and maturity period-

• Open Ended Mutual Fund
• Close Ended Mutual Fund

What is an Open Ended Mutual Fund?

Any mutual fund can be of two types, Open Ended or Close Ended.

Open Ended Mutual Fund as the name suggests, there is no fixed time for ENTRY (BUY) and EXIT (SELL) for the investor in this type of mutual fund, and it is absolutely open, the investor can take ENTRY anytime. Can and can EXIT anytime.

When in a mutual fund, there is no such time limit for entry and exit, then such mutual fund is called OPEN ENDED MUTUAL FUND (Open Ended Mutual Fund).

There is no restriction in OPEN ENDED MUTUAL FUND to issue new Units to the mutual fund company, the point to note is that most MUTUAL FUND are OPEN ENDED like this.

 

But at the same time when the money deposited in an OPEN ENDED fund becomes too much, then the mutual fund manager can convert that fund into CLOSE ENDED FUND according to his convenience of managing the fund.

And in this way, once a fund becomes CLOSE ENDED FUND, then there is a restriction on the entry of the new investor.

Special Features of OPEN ENDED MUTUAL FUND

Let us have a look at some of the features and special features of open ended mutual funds –

There is no restriction on investor's ENTRY and EXIT in open end fund.

In the OPEN ENDED fund, the purchase and sale of its UNIT is done at the NAV of the mutual fund.

In OPEN ENDED Mutual Fund, the company can issue as many new units of mutual fund (UNIT) as it wants, there is no restriction on the number of units.

OPEN ENDED MUTUAL FUND sometimes becomes so big that in order to meet the investment objectives of that mutual fund, its manager has to take a decision that this open fund should be converted into close ended fund.

Benefits of Investing in OPEN ENDED MUTUAL FUND

Let us now look at the advantages of investing in open ended mutual funds-

LIQUIDITY

The biggest advantage of investing in open ended mutual funds is that the investor can CASH that investment whenever he wants by selling his investment at NAV PRICE, and thus investing in OPEN ENDED MUTUAL FUND is very simple in terms of LIQUIDITY. and convenient.

Investment amount and time - Most of the open ended mutual funds have no time limit, and the amount to invest is also small, which is a very convenient investment for a common investor.

NAV PRICE IS FINAL PRICE

In an open ended mutual fund, NAV is its FINAL PRICE, above which units of that mutual fund are bought and sold, and thus NAV is its FINAL PRICE.

Buying and Selling of Open Ended Mutual Funds – Buying and Selling of Open Ended Mutual Funds is at its NAV i.e. BOOK VALUE, and the mutual fund units are redeemed DIRECTLY by the company itself, i.e. bought and sold by the OPEN ENDED MUTUAL DIRECTLY company Goes.