Open-Ended Funds- a detailed guide
There is no time limit for entering or leaving open-ended mutual funds, which are a particular kind of mutual fund. The net asset value, or NAV, of such funds, determines the units that are purchased or sold. NAV varies every day, that is, at the end of every trading day, in reaction to changes in the market values of bonds and stocks. These programs regularly buy and sell the fund units, letting investors come in and go out as they like. The closing market price of publicly traded securities is the same as the fair market value of investments in open-ended funds. Additionally, the maturity date for these funds is not fixed.
Benefits of Open-Ended Mutual Funds
Liquid Investment: these funds have high liquidity, allowing you to redeem your units at any time. Unlike other long-term investment vehicles, open-ended funds allow for flexible redemption at the current Net Asset Value (NAV).
Track Records: Performance information for these funds is readily available and goes several years back. As a result, picking an open-ended fund to invest in sounds like a smart move.
Systematic Investment Plan: Funds that require investors to make lump sum deposits at the time of the fund’s debut may be a risky approach to managing your money. However, many people in the salaried class find that OEF makes an excellent investment. People can invest using SIPs (systematic investment plans), which open-ended funds offer, making this the case.
Open-ended mutual funds’ drawbacks
Even though their fund managers maintain a portfolio that is highly diversified, open-ended funds are susceptible to market risk.
Without consideration from the investors, the asset allocation of the fund is chosen.
Exit loads are also applied to these funds.