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What are the different types of mutual fund schemes?
Open ended mutual fund schemes
An open ended scheme never winds-up or closes. It is the most common type of mutual fund scheme that is available. So, investors who want to buy the scheme can purchase the scheme at the net asset value price and those wanting to sell can do so at the same price (marginally lower). In open-ended mutual fund schemes, there is no limit to the number of investors, shares, or overall corpus of the fund.
Closed ended mutual fund scheme
A closed ended fund scheme will close within a specified period as mentioned in the initial document period. This could be say for a period of 5 years or 7-years etc.
Investors can invest in the scheme at the time of the initial offering and if they desire to liquidate their holdings can do so by selling the same on the stock exchanges.
Interval schemes
Interval schemes possess the features of an open ended scheme as well as a close ended scheme. The units may be traded on the stock exchange or may be open for sale or redemption during pre-determined intervals at NAV related prices.
Investors can choose from the schemes that are mentioned above. It's best to go in for a fund that has a proven track record, although one must admit that past track record is no indication of future performance. You must also keep in mind that longer the tenure in a scheme that you stay invested better are your chances of making money. Also, do remember to examine your portfolio and see how it's faring. You might want to switch if there is a severe underperformance when compared to indices as a whole.
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