What are mutual fund schemes? This is a common question, especially for new investors. Generally speaking, a mutual fund scheme is what classifies a mutual fund. It is either an open- or close-ended scheme. The differentiating factor between these two is the maturity period of the mutual fund.
Learn more about these schemes here.
The Open-Ended Scheme
The open-ended scheme is the one that can be purchased by subscription and then repurchased on a continual basis. This type of scheme does not have any type of fixed maturity period. As a result, when you invest in this type of mutual fund, you can buy and sell units at the NAV (Net Asset Value), which are given each day. The main feature that makes an open-ended scheme appealing is that it provides liquidity.
The Close-Ended Scheme
Another option when it comes to mutual fund schemes is a close-ended scheme. This will have a stipulated maturity period, for example, five to seven years. This fund is available for subscription during a certain period of time when the initial launch is taking place. An investor will be able to invest in the scheme initially, and then they can buy or sell the units on the stock exchange whenever there are units listed.
Understanding the various schemes of mutual funds can help you determine which one you would like to invest in. If you are unsure which mutual fund schemes are best for your needs, then it is best to work with a professional. They can help you understand the risks involved with both and ensure you get the investment results you want and need.
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