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What are Close Ended Mutual Funds?
Close ended fund is a type of mutual fund. The units of a close ended fund are available for purchase only during New Fund Offer. Once the new fund offer period is over, fresh units of the close end fund will not be available for purchase. In short, you can invest in a close end fund only during the time of initial fund offer.
The salient features of close end funds are:
The benefits of close ended mutual funds are:
A Close ended fund works similar to a mutual fund. Investors can purchase units of a close ended fund only during the NFO period. The maturity period of the fund is 3 to 4 years and the investors are not allowed to exit the fund before the maturity of the scheme.
Close ended funds can be traded in the stock market like any other security. The price of the units can vary as per the market fluctuations. Investors who want to exit the fund before maturity can sell their units on the stock market.
Investors can invest directly with an asset management company or via distributors and agents. When you invest in a direct plan, you receive higher number of units as no commission is paid to the distributor. Investors can also subscribe to a close ended fund online from the official website of the mutual fund company.