Closed-ended mutual fund programs only permit investments throughout the fund’s NFO period. Investors are not permitted to make any investments once the NFO period has finished. Before assets are liquidated and investors receive their money back along with any gains from their investments, these funds are originally provided for a predetermined time period, such as three or seven years. Investors can also make buy/sell transactions on stock marketplaces where these funds are listed throughout the duration of the plan. Investors can choose to invest in these funds based on their level of risk tolerance, investment horizon, and financial goals.
Benefits of Closed-Ended Mutual Funds
Due to units being held until they mature, the mutual fund scheme’s defined maturity promotes disciplined investing. This helps your money expand over the long run and in terms of capital.
On stock exchanges, closed-ended funds are frequently traded like equity shares. Due to this, investors can buy or sell fund units at real-time pricing.
The investments in these funds continue to be steady after the NFO period has passed and up until the scheme’s maturity.
Closed-Ended Mutual Funds’ Drawbacks
- You can only invest once, and it must be a sizable amount, in closed-ended funds.
- Equity investments may generate remarkable returns over extremely long stretches of time.
- Funds that are closed-ended have no past performance data.