Open-Ended Schemes
An open-end fund issues and redeems shares on demand, whenever investors put money into the fund or take it out. This happens routinely every day and the total assets of the fund grow and shrink as money flows in and out. That means the more investors buy the BSE 500 Index fund, for instance, the more shares there will be. There's no limit to the number of shares the fund can issue. Nor is the value of each individual share affected by the number outstanding, since net asset value (NAV) is determined solely by the change in prices of the stocks or bonds the fund owns, not the size of the fund itself.
Close-Ended Schemes
Schemes that have a stipulated maturity period (ranging from 2 to 15
years) are called close-ended schemes. You can invest directly in the
scheme at the time of the initial issue and thereafter you can buy or
sell the units of the scheme on the stock exchanges where they are
listed. The market price at the stock exchange could vary from the
scheme's NAV on account of demand and supply situation, unit holders'
expectations and other market factors. One of the characteristics of the
close-ended schemes is that they are generally traded at a discount to
NAV; but closer to maturity, the discount narrows.
Some close-ended schemes give you an additional option of selling your
units directly to the Mutual Fund through periodic repurchase at NAV
related prices SEBI regulations ensure that at least one of the two exit
routes are provided to the investor.
Growth Schemes
Aim to provide capital appreciation over the medium to long term. These
schemes normally invest a majority of their funds in equities and are
willing to bear short-term decline in value for possible future
appreciation.
These Schemes are not for investors seeking regular income or needing
their money back in the short-term
Aim to provide regular and steady income to
investors. These schemes generally invest in fixed income securities
such as bonds and corporate debentures.
Capital appreciation in such schemes may be limited.
Ideal for
Aim to provide both growth and income by periodically
distributing a part of the income and capital gains they earn. They
invest in both shares and fixed income securities in the proportion
indicated in their offer documents. In a rising stock market, the NAV of
these schemes may not normally keep pace, or fall equally when the
market falls.
Ideal for
Aim to provide easy liquidity, preservation of
capital and moderate income. These schemes generally invest in safer,
short-term instruments, such as treasury bills certificates of deposit,
commercial paper and inter bank call money. Return on these schemes may
fluctuate, depending upon the interest rates prevailing in the market.
Ideal for
These Schemes offer tax rebates to the investors
under tax laws as prescribed from time to time. This is made possible
because the Government offers tax incentives for investment in specified
avenues. For example, Equity Linked Savings Schemes (ELSS) and Pension
Schemes.
Recent amendments to the Income Tax Act provide further opportunities to
investors to save capital gains by investing in Mutual Funds. The
details of such tax savings are provided in the relevant offer
documents.
Ideal for
Investors seeking tax rebates.
© Copyright Yash Consultants. Designed by Rajesh for Yash Consultants