WHAT IS OPEN ENDED MUTUAL FUND?
An open ended mutual fund is a collective investment scheme which can issue and redeem shares at any time. The price at which the shares are issued in an open-ended mutual fund can be redeemed depending on the proportion to the net asset value. Hence, the net asset value of an open ended fund reflects the fund’s performance.
How Do Open Ended Funds Work?
The open-ended mutual funds provide the investors with an easy and low-cost way to pool the money and buy a diversified portfolio. Also, the investors do not need a lot of money to gain entry into an open-ended mutual fund. Since these funds allow to buy and sell units on a continuous basis the investors can enter or exit anytime they difference between open and close ended funds which only allow investors to purchase units during the NFO (New Fund Offering) period and redeem those units when the mutual fund matures.
The units can be purchased after the initial offering period. The units are bought and sold at the Net Asset Value declared by the fund. The reason for the varying of these funds is quite simple. The number of outstanding units goes up or down each time the fund house sells or purchases the existing units. An open-ended fund is not obliged to keep selling new units all the time. But, it has to repurchase the units all the time.
How To Invest In Open Ended Mutual Funds?
The open-ended structure allows you to invest through systematic investment plans as well as a lump-sum amount. This is useful if you have built a huge capital over a period of time with small contributions. Investing in mutual funds via SIP allows you to average out the cost of your mutual fund portfolio. Besides, you do not have to worry about the market’s highs and lows. The open-ended mutual funds also allow a systematic withdrawal plan (SWP). This lets an investor exit at pre-determined intervals without having to worry about the tax charged on dividend withdrawals.
What Are The Advantages of Open-Ended Funds?
The Open-Ended Mutual Funds allows changing your holdings in the same fund family anytime. It also allows getting rid of poor performers in the portfolio. Below are some of the advantages of open ended mutual funds:
The open-ended mutual funds are liquid in nature. You can redeem them at any time. When you show your sell order, the fund liquidates the shares at the end of the next business day and within a few days, you get your money back.
You can manage your funds by picking stocks and bonds with online broking firms. Yet, it can prove to become time-consuming if you are managing your own money. Hence it is always good to appoint a fund manager.
Based on your risk appetite, the period you want to stay invested and the type of returns that you expect, you can choose from the different types of mutual funds. It is recommended you choose funds that deliver stability, growth, and income for maximum benefits. Get ready to start your investment journey with mutual fund investments by downloading the Angel Bee app today!