Closed Ended Mutual Fund vs. Open Ended Mutual Funds vs ETF

Sep 16 17:18 2021 QuantumMF Print This Article

Mutual Funds can be of different categories, which means their underlying assert and their style of investing can vary. If we choose to look at them from a structural classification, they are either open-ended or closed-ended mutual funds.

Open-Ended Mutual Funds:

Open ended mutual funds are mutual funds where your investments are not subjected to any lock-in. They are liquid and can be redeemed any time. They may be subjected to an exit load depending on which category they belong to. These types of mutual funds may or may not be listed on the exchange. They are more popular among the investors as compared to closed ended mutual funds.

Closed-ended Mutual Fund:

As the name suggests,Guest Posting closed-ended mutual funds are funds that are subjected to a lock-in period or a fixed maturity period.. Closed-ended funds can be bought or sold real-time just like any additional stock on an exchange.  However, one key difference between closed-ended mutual fund vs. open-ended mutual fund is that in Closed-ended Fund once you invest, you cannot redeem your money back unless the lock-in period is over.. The lock-in negates the possibility of an impulsive decision during times of unstable market conditions. A steady AUM helps fund managers to take prudent investment decisions. Closed-ended mutual fundsare mandatorily required to be listed on the exchange but you can invest without a DEMAT account too.  

Investors with a long-term investment horizon who do not need the invested money during that horizon can look at investing in closed-ended funds.

ETFs:

Exchange-traded funds are investment vehicles that invest in a basket of securities. These funds are open-ended. You can buy and sell them on the markets just like stocks. They are not available over-the-counter which means you will need a DEMAT account to invest in them. ETFs mirror or replicate the performance of a particular index.

ETFs are managed passively & actively.  ETFs generally  have lower expense ratios than those charged by actively managed funds.

Investing in more than one ETF could lead to duplication or over-diversification. An ETF tracking the NIFTY 50 and an ETF that tracks technology or IT companies may have many overlaps if the underlying stocks are common.

Disclaimer: The views expressed here in this Article / Video are for general information and reading purpose only and do not constitute any guidelines and recommendations on any course of action to be followed by the reader. Quantum AMC / Quantum Mutual Fund is not guaranteeing / offering / communicating any indicative yield on investments made in the scheme(s). The views are not meant to serve as a professional guide / investment advice / intended to be an offer or solicitation for the purchase or sale of any financial product or instrument or mutual fund units for the reader. The Article / Video has been prepared on the basis of publicly available information, internally developed data and other sources believed to be reliable. Whilst no action has been solicited based upon the information provided herein, due care has been taken to ensure that the facts are accurate and views given are fair and reasonable as on date. Readers of the Article / Video should rely on information/data arising out of their own investigations and advised to seek independent professional advice and arrive at an informed decision before making any investments. None of the Quantum Advisors, Quantum AMC, Quantum Trustee or Quantum Mutual Fund, their Affiliates or Representative shall be liable for any direct, indirect, special, incidental, consequential, punitive or exemplary losses or damages including lost profits arising in any way on account of any action taken basis the data / information / views provided in the Article / video.

Mutual Fund investments are subject to market risks, read all scheme related documents carefully.

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