Diversify your investment portfolio at the lowest possible risk with open-ended mutual funds.
An open-ended mutual fund is an investment option that pools money from investors for investment purposes in several securities. The pooled cash helps raise shares that are sold to investors directly and are also redeemed by the fund provider.
Now that we have briefly understood what is open-ended mutual fund, let us look at some of its merits:
Having explained what is an open-ended fund, let us understand how it works. An open-ended fund, as the name suggests, is always open to the prospect of investment. Availability of shares is directly proportional to buyer demand. When investors purchase these shares, it means that there is now the space to create new ones in their place. Conversely, when investors sell them, the shares go out of circulation. The buying and selling of shares essentially rely on the NAV, which may change daily.
If investors redeem a considerable corpus of shares at a time, then the open-ended mutual fund scheme will sell a couple of the investments to pay the investors.
Now that you know what is an open-ended fund let us find out whether this investment is suitable for you. An open-ended fund is a low-cost investment solution to poll in money. At the same time, it can offer much-needed diversification to your investment portfolio. Due to this attribute, an open-ended mutual fund scheme is an ideal investment plan for first-time investors or sceptics exploring uncharted territories or even those with a limited amount of money to invest.
The tax rates and rules are subject to changing percentages of investments when it comes to open-ended mutual funds. Therefore, investors have to keep in mind their investment goals as well as risk appetite when investing.
Investors have to meet specific eligibility criteria as per SEBI rules. These are:
To start investing, you can visit any open-ended mutual fund provider. To invest in the direct plan, you will need to consult with a financial advisor. If you have a good understanding of the stock markets, you can just as easily save your time and energy by investing in Mutual Funds online.
Download the digibank app to start the paperless process of creating your savings account and be one step closer to investing in Mutual Funds.
*Disclaimer: This article is for information only. We recommend you get in touch with your income tax advisor or CA for expert advice.
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Mutual Fund investments are subject to market risks, read all scheme related documents carefully before investing.