Close-ended Mutual Fund Schemes

Close-ended Mutual Fund Schemes

Close-ended Mutual Fund Schemes is one of the types of Mutual Funds in India. Opting for the close-ended mutual fund schemes will offer you with definite compensation that other types of mutual fund schemes would not. An emergent number of Indians are now opting to invest their money in close-ended mutual fund schemes.


What is a close-ended mutual fund scheme?
A close-ended mutual fund scheme clearly stipulates the maturity period, which could be wherever in 2 to 15 years of time. One has to make investments into any close-ended mutual fund scheme as soon as they are issued. Afterward on, you are free to buy or sell close-ended mutual fund scheme units when they are listed on the stock exchange.


Important details
Once the units are listed on the stock exchange, the market price of the close-ended mutual fund scheme units may vary based on factors like:-


 The outlook of the unit holders
 Demand for & supply of scheme units


Usually, the units of the close-ended mutual fund schemes are traded on the stock exchange at a price less than its Net Asset Value or NAV. On approaching maturity, the difference between the scheme unit's trading price and NAV may thin drastically.


The Way a close-ended mutual fund scheme paybacks the fund manager:-


Liquidity management- Since a close-ended mutual fund scheme has a rigid term before it matures; the fund manager does not have to be bothered about the corpus at his disposal. In an open-ended scheme, the fund manager will have to deal with inflow and outflow of money on a persistent basis, leaving the person with only a vague idea of how the corpus would look over a certain period of time. In other words, a close-ended mutual fund scheme paybacks a fund manager in terms of proficient liquidity management.


Safekeeping from short-term market fluctuations
Close-ended mutual funds offer a certain security from short-term market fluctuations vis-à-vis the investments managed by the fund managers. The flat term for maturity allows fund managers to work with investments on a long-term viewpoint.


Various Close-ended mutual fund schemes in India
Some of the companies providing various types of close-ended mutual fund schemes in India has been listed below.


 Birla Sun Life Mutual Funds
 HDFC Mutual Fund
 LIC Mutual Fund
 Kotak Mahindra Mutual Fund
 Franklin Templeton Mutual Fund
 ICICI Prudential Mutual Fund
 Sundaram Mutual Fund
 Tata Mutual Fund
 Standard Chartered Mutual Fund

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Open-ended Mutual Funds

Open-ended Mutual Funds

What are Open-ended Mutual Fund Schemes?
Open-ended Mutual Fund Schemes is one of the types of Mutual Funds in India. An Open-ended Mutual Fund does not confine itself to a given set of number for the shares. In other words, the number of shares remains non-confined and thus technically it serves as an open ended instrument. A greater part of the Mutual Funds in India are open-ended. The Open-ended Mutual Fund Schemes in India are more general than the closed-ended Mutual Fund Schemes.


Features of Open-ended Mutual Fund


These are the following distinctiveness of the Indian open-ended Mutual Funds:-


 The open-ended Indian mutual fund schemes have soaring liquidity as the investors can put and take out their many as and when they require.
 The total assets of the open-ended Mutual Fund oscillate with the in and out flow of money.
 This type of fund permits the investors to buy the shares or sell the shares directly, any time.
 Based on the existing NAV (Net Asset Value), this type of fund issues fresh shares to the investors and redeem them once the investor makes a assessment to sell the shares.
 The fund can issue limitless shares and individual share value remains unaltered by the shares outstanding.
 The net asset value (NAV) of the fund determines the value of each share.
Remuneration of Open-ended Mutual Fund
Open ended Mutual Funds provide a number of remuneration which is as follows:
 These funds maintain a lot of elasticity. This is to say that one can draw your money out any point of time.
 The funds can be diversified under the range of kinds of investment opportunities. This way you can garner the fruits of different investment options.
 The majority of the open mutual funds do not charge any fees while transferring a range of funds within the same family.


Hazard of Open-ended Mutual Fund


There are also some risks implicated with the open-ended Mutual Fund, which are as follows:-


 The returns are unnatural when abrupt redemptions result in a decline in the value of portfolio.
 The fund returns may also get pretentious by the various types of market forces.
 Open ended Mutual Funds cannot be traded in the stock market.

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Indian Mutual Fund Schemes

Varieties of Mutual Funds in India

These days, various types of Indian Mutual Fund Schemes have come up which provide to a range of financial needs like tax benefits, financial position, risk tolerance, return expectations and others. Here is a catalog of the diverse types of Mutual Fund in India.

Indian Mutual Fund Schemes

Close-ended Mutual Fund Schemes - Close -ended schemes are those which have a particular maturity period (which generally ranges from 3 - 15 years). At the time of initial public issue one can make straight investment in the scheme and can also get the benefit of buying and selling of the units. Due to demand and supply in the market & the policy holders' outlook and assorted other market factors, the market price may vary from Net Asset Value (NAV). Some of the close-ended fund schemes in India are ING Vysya Dynamic Asset Allocation Fund. Birla sunlife capital protection fund and Kotak Dynamic Asset Allocation Scheme.

Open-ended Mutual Fund Schemes - There is no rigid maturity for the open-ended mutual fund schemes. One has to contract directly with the Mutual Fund for his investments & redemptions. Liquidity is the key feature here. Buying and selling of the units becomes suitable at the related prices of the net asset value (NAV). Some of the open-ended fund schemes in India are Birla Sun Life infrastructure fund, Franklin Templeton Blue-chip Fund, HDFc top 200, HDFC equity fund (G) etc.

Tax-saving Mutual fund Schemes - Individuals, companies, partnership firms, and body corporate are some of the investing parties in the different Mutual Funds available in the market principally to enjoy the remuneration of tax saving. The Indian Mutual Funds are guided by principles of SEBI. It provides certain tax benefits to the fund holders. It is compulsory that tax benefits should be declared in a column which reads "objects of the offering". Birla Sun life Tax Relief-96, SBI Mutual Funds, HDFC Tax Saver, Prudential ICICI and Bajaj Capital are a number of the tax saving Mutual fund companies in India.

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Future of Mutual Funds in India

Future of Mutual Funds in India - An Overview

Financial experts believe that the potential of Mutual Funds in India will be very brilliant. It has been predictable that by March-end of 2012, the mutual fund industry of India will reach Rs 99,90,000 crore, taking into account the total assets of the Indian commercial banks. The assessment was based on the December-04 asset value of Rs 1,50,537 crore. In the coming 10 years the annual multiple growth rate is expected to go up by 14.5%. Since the last 5 years, the growth rate was recorded as 9.3% annually. Based on the current rate of growth, it can be forecasted that the mutual fund assets will be double by 2012.

Indian Mutual Funds Future - Growth Facts

       In the past 6 years, Mutual Funds in India have recorded a growth of 100 %. In India, the rate of saving is 24 %. In the future, there lies a big possibility for the Indian Mutual Funds industry to expand.

        

       Quite a lot of asset management companies which are foreign based is now entering the Indian markets. A number of commodity Mutual Funds are introduced now. The SEBI (Securities Exchange Board of India) has approved the permission for it. More emphasis is put on the effective Mutual Funds governance.

        

       There is also sufficient scope for the Indian Mutual funds to enter into the semi-urban and rural areas. Financial planners will play a major role in the Mutual Funds market by providing people with proper financial planning.

Future of Indian Mutual Funds- Conclusion

Looking at the past developments and combining it with the current trends it can be finished that the future of Mutual Funds in India has lot of positive things to offer to its investors.

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Drawbacks of Mutual Funds

Drawbacks of Mutual Funds

Mutual Funds, like every venture, have their own share of compensation and disadvantages. Before you venture out to make your investment in Mutual Funds, it is advisable that you do a thorough study of the pros and cons of Mutual Funds. Just like you can list a number of Mutual Funds advantages, you will find drawbacks of Mutual Funds as well if you do a market research. Several of the common drawbacks of Mutual Funds in India are listed below:

Disadvantages of Mutual Funds in India

There are several shortcomings of Mutual Funds in India. Some of these Mutual disadvantages are as follows:

       No Guarantees: Every outlay comes with some sort of risk. If the value of an entire stock market falls, it will directly affect the mutual fund shares as its values will also turn down, irrespective of the portfolio balance. However, the risks concerned in mutual funds are much lesser than buying and selling of stocks on your own. This is because when you are dealing through a mutual fund you do not have this risk of money loss.

        

       Taxes: In a usual year, the mutual funds which are most efficiently managed have the capacity to sell anywhere from 10 - 70 % of their portfolio securities. If the money you invest in Mutual Fund earns a yield, you will be required to pay the taxes on the dividend received by you. You have to pay the taxes even if you make your money reinvest in Mutual Fund.

        

       Fees and Commissions: An administrative fee is required by all kinds of funds to meet the operating expense. There are many funds which even charge commission on sales or "loads" to pay financial consultants, brokers, financial institutions or financial planners. If you buy stocks or shares from Load Fund, you have to pay a commission on sales irrespective of the verity that you are consulting a financial advisor or a broker.

        

       Risk Management: It depends on the right assessment of the fund manager that you will get a reasonable return or not. This is unlike Index Funds where there is no management risk implicated because of the absence of managers. 

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