Mutual Fund Schemes can be classified in many ways and on the basis of redemption, they can be classified into Open ended and Close Ended Schemes.
But what do they mean?
Why is it important to understand where you are investing?
In this episode, Anmol talks about Open ended and Close Ended Schemes and key differences in terms of:
a) When can one invest in them?
b) How liquid are they?
c) Can they be redeemed whenever the investor wants?
and more...
म्यूचुअल फंड स्कीम को कई तरह से वर्गीकृत किया जा सकता है और रिडेम्पशन के आधार पर इन्हें ओपन एंड एंड क्लोज एंडेड स्कीम में वर्गीकृत किया जा सकता है।
लेकिन उनका क्या मतलब है?
यह समझना महत्वपूर्ण क्यों है कि आप कहां निवेश कर रहे हैं?
इस कड़ी में, अनमोल ओपन एंड एंड बंद एंडेड स्कीम्स और प्रमुख अंतरों के बारे में बात करता है:
a) उनमें कोई कब निवेश कर सकता है?
b) वे कितने तरल हैं?
c) क्या जब भी निवेशक चाहें, तो उन्हें भुनाया जा सकता है?
Are there any burning questions giving you sleepless nights? Write to us at anmol@7prosper.com
Disclaimer: This podcast is for educational purposes only. Anything said should not be construed as advice. Make your investments only after consulting your financial advisor. If you're interested in our financial planning service, visit us at: www.7prosper.com
Transcript:
Hi guys. Welcome to Money Ki Baat. In today's short episode, I am going to talk about Open ended and Closed ended Mutual Funds.
In my previous episodes, I have already spoken about different categories of Equity Mutual Funds and Debt Mutual Funds.
All of these Equity and Debt schemes are either open ended or closed ended. Open Ended Schemes are the schemes which give you the flexibility to invest or withdraw your money anytime you want. Closed Ended Schemes do not have this feature.
In this case, you can purchase mutual fund units only for a certain period of time from the date when subscription begins. And you get the money only at the time of the maturity of the scheme.
When a scheme is introduced in the market, it is given a defined maturity period and you cannot withdraw your money before the scheme's maturity period ends.
When we say that Mutual Funds give you the flexibility of investing and withdrawing your money whenever you want, we specifically talk about Open Ended Mutual Fund schemes.
Closed ended mutual fund schemes are more or less like Fixed Deposits because they have a fixed lock-in period.
However, if you want money before it's maturity, closed ended schemes also gives you the option of selling your mutual fund units to a third person who is willing to purchase those units in the stock market.
In this way, you can sell your Closed Ended Mutual Fund units before it's maturity.
However, you must presume that if you have invested in a Closed Ended Scheme, you will be able to withdraw the money only at the time of it's maturity.
You may not always find a buyer to whom you can sell your mutual fund units, whereas in open ended mutual fund schemes, whenever you want to withdraw your money, the Asset Management company or the Mutual Fund company will give you back the money.
Therefore, before investing in Mutual Funds, please check with the nature of the scheme you're investing in, check if it is an open ended or a closed ended scheme. If it is a closed ended scheme, make sure it's maturity period aligns with your goal date.
To give an example, do not invest in a Closed Ended Scheme whose maturity period is in 3 years, if you have a Goal within 2 years.
That's all for today's episode. Feel free to drop your questions in the comment section.
In another episode, I am going to talk about the advantages and disadvantages of Open Ended and Closed Ended Mutual Fund Schemes.
Until then, stay tuned.
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