Mutual funds based on the time period

Many of us are so comfortable with banking investments vehicles that we never try to look at opportunities that are out of this world. The interest and returns in the bank are though low, we feel a sense of safety in the bank.

But, a larger part of Americans is never dependent on banks unlike in Asian countries. They seek out investments in the markets, which offer them lucrative returns and also gives safety to their invested amount.

Investing in markets has too many options, like stocks alone, mutual funds, debt to other companies, bonds, investing in commodities and so on. But, what is one thing that suits the majority of the population? It’s Mutual Funds!! The reason is that it starts from as low as 100$ and can go up to thousands and lakhs.

With so much spoken about mutual funds, let’s highlight on the various types of funds that are available so that you can learn the type that suits your budget and meets your financial objective at the end.

Mutual funds are mainly classified into 2 categories, 1 based on the time frame; and the other based on the financial objective. We shall talk about the time-frame based funds here.

The time -frame based funds:

Open-ended scheme:

This kind of a fund is the most sought after, as the name suggests that the fund is open for subscription and redemption anytime, there is no time-frame to gain entry and exit. This kind of fund gives you a liquidity anytime you need to redeem back your shares for money. It’s the best mode when you don’t have any other spare cash to rely on.

Close-ended scheme:

This one as the name says is a close-ended fund that has a maturity period and an entry date fixed. You can’t subscribe at any point in time, however good and great the scheme is! These funds are available for subscription only for a few days’ time, at the time of launching and have some lock-in period.

Interval scheme:

This one has an interval to enter and exit from the fund. It’s a combination of both open and close-ended funds. Here, the entry and exit can be done only at a specified interval, as specified by the scheme.

So, you get the allotments in NAV. NAV is the Net Asset Value is a term coined by the Asset Management company to let you know how much units you hold in that particular scheme or fund.