Open-ended, Close-ended and Interval schemes

Open-ended schemes

An Open-ended mutual fund scheme is one in which Purchase / Switch / Redemption of units is possible on all transaction days.

In this scheme, investors can purchase units from the asset management company directly (rather than from existing investors).

So, the assets in this scheme will keep changing (going up or down) on every transaction day.

This type of schemes are preferred because they allow investors to invest or redeem as and when they want.

i.e These provide flexibility.

However, in Close-ended mutual fund schemes, investors will be able to purchase in New Fund Offer period only.

They will be able to redeem the investment only on the date specified by the scheme.

So, normal transactions like additional purchase, switch or redemption are not possible during the normal course of the close-ended scheme.

In most cases, the close ended scheme will wind off on the target date by redeeming and distributing all the money to the investors.

There are another type of schemes called Interval Schemes.

In these schemes, investors can be able to transact only on specified days in which the scheme will be made open.

They cannot transact on other normal transaction days.

So, this scheme is like open for short duration, close for long duration type.