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Open-Ended Vs Close-Ended Mutual Funds – Finance | Management Notes

Open-Ended Vs Close-Ended Mutual Funds |What is the difference between open and closed end mutual funds? | Types of Mutual Funds | What are open ended and closed ended mutual funds? | What is an open ended mutual fund? | What does closed end fund mean?

What is meant by mutual funds?

A mutual fund is a professionally-managed investment scheme, usually run by an asset management company that brings together a group of people and invests their money in stocks, bonds, and other securities.

How are mutual funds classified?

Mutual funds are classified according to various attributes, such as the nature of the investment, risk profile, and investment philosophy. Apart from these, the funds are differentiated on the basis of their structure. ie; open-ended and closed-ended.

What are open ended and closed ended mutual funds?

Open-end mutual funds are the type of funds that have no restrictions in terms of the amount of shares that the fund can issue. It is continuously available for subscription and repurchase. The closed-ended mutual fund is a pooled investment vehicle, having a fixed maturity period, i.e. 3 to 5 years, which are listed on a recognized exchange.


Open ended vs Closed ended Mutual Fund

 S.No.

Open Ended Mutual Funds

Close Ended Mutual Funds

 1.

What is meant by open ended fund?

Open-end mutual funds are the type of funds that have no restrictions in terms of the amount of shares that the fund can issue.

What is a close ended mutual fund?

Closed-end mutual funds are the type of funds that have a fixed number of shares and are traded among investors on an exchange.

 2. 

Do open end funds have a maturity date?

There is no fixed maturity period in open-ended mutual funds.

Do closed end funds have a maturity date?

There is a fixed maturity period in close-ended mutual funds. ie;3-5 years.

 3. Open-Ended mutual funds are not listed on the stock exchange and transactions are performed directly through the fund. Close Ended Mutual Funds are listed on a recognized stock exchange for trading.
 4. The transactions of Open-Ended mutual funds are executed on a daily basis. The transactions of Close Ended mutual funds are executed on a real-time basis.
 5.

What are open ended mutual fund schemes?

Open-Ended mutual funds are available throughout the year for a subscription.

What is close ended scheme in mutual fund?

Close Ended mutual funds are available only during specified days for a subscription.

 6.

How liquidity is provided for open ended funds?

In an open-ended mutual fund, the corpus is variable because of continuous buying and redemption.

Can I redeem closed ended funds?

No, you cannot. In a close-ended mutual fund , the corpus is fixed because no new units are offered for sale, beyond the limit specified.

 7. The liquidity provided by the open-ended mutual fund is itself. The liquidity provided by the close-ended mutual fund is the stock market.
 8. In open-ended mutual funds, profits depend on the investors, and when they exit the fund. If they have exceeded their initial investment, then it is considered as a Gain. In close-ended mutual funds, profits to the shareholders can be in the form of income and capital gain distributions. It can also be capital gains realized from the sale of shares with increasing share value though it is exposed to tax liability.
9. In open-ended mutual funds, price is determined by Net Asset Value (NAV). In close-ended mutual funds, price is determined by the demand and supply as well as the fundamentals.
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