Open-ended funds Vs Close-ended funds vs Interval Funds

Any mutual fund will either invest in equities, debt or a mix of both. Further, they can be open-ended, close-ended or interval mutual fund schemes.

1. Open-ended funds: In an open-ended fund, one can invest or enter and redeem or exit at any point of time without any fixed maturity period. These funds are open for subscription and redemption throughout the year. Investors can buy and sell units of open-ended funds at any time at the current net asset value (NAV). The NAV of an open-ended fund is calculated at the end of each business day based on the market value of the fund's assets. Open-ended funds are suitable for investors who want liquidity and flexibility in their investments.

2. Close-ended funds: Close-ended funds have a fixed maturity period and are open for subscription only during the initial offer period. Once the offer period is over, investors cannot buy or sell units of the fund on the stock exchange. However, some close-ended funds offer a limited window for redemption, usually after completion of a lock-in period. The NAV of close-ended funds is determined by the market value of the underlying assets and demand and supply factors. Close-ended funds are suitable for investors who have a long-term investment horizon and do not require liquidity.

3. Interval Funds: Interval funds are funds that have the features of open-ended and close-ended funds as they are opened for repurchase of shares at different intervals during the fund tenure. In this fund, investors are allowed to buy and sell units at predetermined intervals, usually monthly or quarterly. The NAV of interval funds is determined based on the market value of the underlying assets at the end of each interval. Interval funds are suitable for investors who want to balance their liquidity needs with long-term investment goals.

In conclusion, investors can choose the type of mutual fund based on their investment horizon, risk appetite, and liquidity needs. Open-ended funds are suitable for investors who require liquidity and flexibility, close-ended funds are suitable for long-term investors, and interval funds offer a balance between liquidity and long-term investment. It's important to research and understand the investment objectives, risks, and costs of each type of fund before investing.