Open ended schemes are mutual funds which are ‘open’ for investment and redemptions at any time. Most of the funds commonly available across platforms in India are open ended schemes. These funds come without any lock-in period or maturity, are simple to invest in and easy to understand. The NAV for open ended funds is calculated daily on the close of business day.
Some features of Open ended schemes are:
a) Open-ended funds offer easy liquidity.
b) These schemes are open for investment and very small investments are also permissible.
c) Open ended schemes offer easy entry/exit and high liquidity.
Benefits Open ended schemes are:
1. Investment in open ended schemes is available in lump sum as well as through SIP.
2. There is no restriction on the number of purchases in the schemes.
3. Open ended schemes offer transparency and their performance track record is easily available.
Some limitations of Open ended schemes are:
a) Investors are tempted to take action on the basis of market fluctuations and may buy/redeem basis price action in markets.
b) Timing the market is easy in open ended schemes.
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