Mutual Fund Types - Structure

Wide variety of Mutual Fund Schemes exists to cater to the needs such as financial position, risk tolerance and return expectations etc. thus mutual funds has Variety of flavors, Being a collection of many stocks, an investors can go for picking a mutual fund might not be easy. There are over hundreds of mutual funds scheme to choose from. It is easier to think of mutual funds in categories, mentioned below.

Based on the STRUCTURE mutual fund are of 2 types.
1. Open - Ended Schemes
2. Close - Ended Schemes
 
1. Open - Ended Schemes:
These schemes can be subscribed all through the year. Also they do not have a fixed maturity period. Here investors can conveniently buy and sell units at Net Asset Value ("NAV") related prices. Thus the key feature of open-end schemes is liquidity.

2. Close - Ended Schemes:
These schemes will be announce with a closing date.. Here one can invest directly in the scheme at the time of the initial or public issue. Depending on the structure of the scheme there are two exit options

      2.1 Investors can transact (buy or sell) the units of the scheme on the stock exchanges where they are listed.
      2.2 Alternatively some close-ended schemes provide an additional option of selling the units directly to the Mutual Fund through periodic repurchase at the schemes NAV

However one cannot buy units, but can only sell units during the liquidity window. As per SEBI regulations at least one of the two exit routes must be provided to the investor.