While many people are intrigued by the returns and high growth rate of mutual funds in the recent years, not many people are armed with the information to take control of their investment portfolio leading to lower returns or giving high brokerage fees to middlemen.
To avoid this, here is a five part information series, to help you understand various types of mutual funds which can help you decide which is best suited for you.
Structure Based Mutual Funds
These types of mutual funds are differentiated based on the time of the year you can invest in and the number of shares that can be issued.
Open-ended funds:
These type of funds do not have any restrictions on number of shares or bonds that are to be issued to that investors.only in the very rare cases any new investments to the investors is closed.
The bonds and shares are issued on their net asset value(NAV). This option is best when you want an easy and cost effective way to understand mutual fund investment to new investors. In case you want to know how to control and grow your investment portfolio, this will be the best way to learn your way to become a pro in the field.
Closed end fund:
It is controlled method of raising funds to pre specified amount of capital at only one time by an IPO by giving out a fixed number of shares.
These funds are bought by investors as a stock.
The entire portfolio is carefully strategized and actively managed by a fund manager. The investor will not have any control over his portfolio. This type of investment is usually specified for a particular sector or a geographic market.
This type of mutual fund is best suited for individuals who are unsure on how to manage their portfolio, would rather prefer a well informed professional to take the shot.
Interval funds:
This is a combination of both open-ended and closed-end funds. These types of mutual funds or the closed end interval fund offer a buy back from their investors at a regular period of time., it can be either 6 month or 12 months of tenure period.
The management company of the firm offers a repurchases to existing mutual fund investors during the specified tenure intervals. It helps the investors to sell their non-performing stocks to their existing NAV.
