SCHEMES ACCORDING TO MATURITY PERIOD :

The MFs in India offer a wide array of schemes that cater to different needs suitable to any age, financial position, risk tolerance and return expectations. These include: open-ended schemes, which provide easy liquidity; close-ended schemes with a stipulated maturity period; growth schemes, which provide capital appreciation over medium to long term; income schemes, which provide regular and steady income to investors; balanced schemes, which provide both growth and income by periodically distributing a part of income and capital gains they earn; money market schemes; which provide easy liquidity, preservation of capital and moderate income; and tax saving schemes, which offer tax rebates to investors under tax laws as prescribed from time to time.

(i) Open ended mutual funds: An open ended mutual funds is a fund with a non-fixed number of outstanding shares/units, that stands ready at any time to redeem them on demand. The fund itself buys back the shares surrendered and is ready to sell new shares. Generally the transaction takes place at the net asset value which is calculated on a periodical basis. The net asset value (Net Asset Value per share value of the fund’s is total net assets after liabilities divided by the total number of shares outstanding on a given day) of the mutual funds rises or falls as a result of the performance of securities in the portfolio and the stock exchanges. The key feature of open ended scheme is liquidity.

(ii) Close ended mutual funds: It is the fund where mutual fund management sells a limited number of shares and does not stand ready to redeem them. Generally the transaction takes place at the net asset value which is calculated on a weekly basis. The shares of such mutual funds are traded in the secondary markets. The requirement for listing is laid down to grant liquidity to the investors who have invested with the mutual fund. Therefore, close ended funds are more like equity shares. The main differences between close ended and open ended funds are

 

CLOSE ENDED SCHEMES	OPEN ENDED SCHEMS
1. Fixed corpus: no new units can be offered beyond the limit. 2. Listed on the stock exchange for buying and selling.   3. Two values available namely NAV and the Market Trading Price.   4. Mostly liquid.	1. Variable corpus due to on going purchase and redemption. 2. No listing on exchange transactions done directly with the fund.   3. Only one price namely NAV. 4. Highly Liquid.