Mutual Fund Basics - Part II (Types of Mutual Funds)

In the First Part, I explained about what is mutual funds and their advantages and disadvantages. In this part I am going to explain the basic types of mutual funds. Mutual funds can be categories according to Maturity Period or Investment Objective.

Mutual Funds according to Maturity Period

Based on the maturity period mutual fund schemes can be categories into two types

 1. Open Ended Mutual Funds         

An open ended mutual fund is one that is available to purchase and repurchase continuously. Liquidity is the main feature of open ended mutual funds. There is no maturity date for open ended mutual funds. Investors can buy or sell unit at any time based on NAV which is declared on a daily basis.

Mutual Fund Basics - Part I

A mutual fund is a professionally managed investment scheme that pool money from many investors and invest in market securities. The companies which manage the funds are called AMC (Asset Management Company).

Profits and losses are shared by the investors by the proportion of their investment. AMC allocates units to the investors as per their investment. The value of unit varies daily basis based on the market.