Mutual funds schemes can be classified into two schemes depending upon its maturity period.
1. Open-ended schemes
2. Close-ended schemes
Open-Ended Fund
An open-ended Mutual fund is one that is available for subscription and repurchase on a continous basis. These Funds do not have a fixed maturity period. Investor can easily buy and sell units at Net Asset Value ( NAV ) related price which declare on daily basis. The best feature of open-end schemes is liqiuidity.
Close-Ended Fund
A close-ended fund has a fixed maturity period e.g 5 - 7 years. The fund is open for subscription only during a specific period at the time of launch of schemes. 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 schemes on the stock exchanges where the units are listed. These mutual funds schemes disclose NAV on weekly basis.
A scheme can also be classified as growth fund, income fund, or balanced fund considering its investment objective. Such schemes may be open-ended or close-ended as described above. Such schemes may be classified as follows
Growth or Equity Oriented fund
The aim of growth fund is to provide capital appreciation over the medium to long term. This type of funds normally invest a major part of their amount in equities. Such funds have comparatively high risks. Growth funds are good for investors having a long term outlook seeking appreciation over a period of time.
Income or Debt Oriented funds
The aim of Income funds is to provide regular and steady income to investors. Such funds generally invest in fixed income securities such as bonds, corporate debentures, Government securities and money making instruments. This type of funds are less risky compared to equity funds.
Balanced Fund
The aim of balanced fund is to provide both growth and regular income. Such types of funds invest in both equities and fixed income securities in a balanced proportion. These are appropriate for investors looking for moderate growth. These fund generally invest 40 % in equity and 60 % in debt instruments.
Money Market or Liquid fund
These funds are also income funds and their aim is to provide easy liquidity, preservation of capital and moderate income. These type of funds are appropriate for corporate and individual investors as means to park their extra money for short periods.
1. Open-ended schemes
2. Close-ended schemes
Open-Ended Fund
An open-ended Mutual fund is one that is available for subscription and repurchase on a continous basis. These Funds do not have a fixed maturity period. Investor can easily buy and sell units at Net Asset Value ( NAV ) related price which declare on daily basis. The best feature of open-end schemes is liqiuidity.
Close-Ended Fund
A close-ended fund has a fixed maturity period e.g 5 - 7 years. The fund is open for subscription only during a specific period at the time of launch of schemes. 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 schemes on the stock exchanges where the units are listed. These mutual funds schemes disclose NAV on weekly basis.
A scheme can also be classified as growth fund, income fund, or balanced fund considering its investment objective. Such schemes may be open-ended or close-ended as described above. Such schemes may be classified as follows
Growth or Equity Oriented fund
The aim of growth fund is to provide capital appreciation over the medium to long term. This type of funds normally invest a major part of their amount in equities. Such funds have comparatively high risks. Growth funds are good for investors having a long term outlook seeking appreciation over a period of time.
Income or Debt Oriented funds
The aim of Income funds is to provide regular and steady income to investors. Such funds generally invest in fixed income securities such as bonds, corporate debentures, Government securities and money making instruments. This type of funds are less risky compared to equity funds.
Balanced Fund
The aim of balanced fund is to provide both growth and regular income. Such types of funds invest in both equities and fixed income securities in a balanced proportion. These are appropriate for investors looking for moderate growth. These fund generally invest 40 % in equity and 60 % in debt instruments.
Money Market or Liquid fund
These funds are also income funds and their aim is to provide easy liquidity, preservation of capital and moderate income. These type of funds are appropriate for corporate and individual investors as means to park their extra money for short periods.
No comments:
Post a Comment