However, classification of mutual funds. Hence, it can be done on either investment objective. And structure of MF. And there are different types of mutual funds available in market. Therefore, you can choose fund depending on your risk capacity. You have to know mutual fund classification.
Types of Mutual fund on structure based
There are three main types of investment fund. Such as open and close end funds. And unit investment trust. But they differ slightly in structure. Each fund provides you with management and diversification. In both inside and outside retirement plans.
Open ended mutual fund
You can buy and sell its units at any time. So that you can buy and sell your holdings at any time. It is common type of mutual fund available in market. Open end funds are invest in companies. So you can able to buy or sell an unlimited number of shares. Certainly, there is no dollar or numerical limit to number of shares.
Therefore, company can also buys back any shares in market. Probably, you can buy and sell directly from issuing company. But they cannot be traded in any type of secondary market. In some cases these open end fund. Hence, it becomes closed to new investors. Consult your advisor.
Similarly, you can see open end funds have two prices. That is net asset value (NAV) can viewed as bid price. It does not include in cost of any sales charges. Another public offering price (POP) which is for new investors. You need to understand different between Open and close end schemes.
Finally, open end schemes do not have fixed maturity period. You can enter into and exit at any time from scheme. Therefore, you can buy and sell units. Based on Net Asset Value (NAV).Similarly, one of key benefits offers are Liquidity.
Closed ended Mutual fund
You can invest directly in scheme at time of initial issue. Therefore you can buy or sell units of scheme. On stock exchanges where they are listed. These close ended schemes have maturity periods from 2 to 15 years. Moreover, market price of units could vary from NAV of scheme. Because it depend on your demand and supply. And your expectations and other market factors.
Generally, close ended mutual fund schemes trade at discounts to NAV. But discount narrow is closer to maturity. Therefore, close end mutual fund does not engage. In adding traditional and subtracting of additional shares. It trades through stock exchange. Before you invest Check on close ended scheme.
However, New York Stock Exchange (NYSE) has fixed. No of share that available in market. Probably, it has major type of Investment Company. Unlike open end funds, they only have limited number of shares. Therefore, this fund company issues shares in an IPO. And all shares that are purchased can be traded on exchange.
Similarly, close end funds are maintain by portfolio managers. Hence, it pays you higher yield and also high risk. Generally, these funds are unique and actively managed. Moreover, close end funds do not any kind of charges. But investors must pay a commission to buy or sell. It just likes other security and stock.
Unit Investment Trusts (UITs)
However, UITs are hybrid of closed and open end funds. Hence, with some characteristics of ETFs. Similarly, it looks like open end funds. And you can buy and sell directly from issue on current basis. Moreover, in some cases you can trade in secondary market. They also charge some type of sales load.
However, UITs allot closed end funds. Because, their offerings are not unlimited. Like ETFs it always made up of set of portfolio securities. And these securities are selected by professional manager’s team. UITs sell share in units. Check risk tolerance.
Further, this UITs issue only to public once they formed. Generally have short life span. You can sell shares in open market. Unit investment trusts do not have professional managers. Hence, your securities portfolio created by UIT will not change.
Finally, there are many different classifications for mutual funds. And other investment companies that you know. In most cases, there’s no wrong choice or clear right. You need to choose which type of fund fits. It helps to avoid headaches in terms of liquidity.
And taxes and investment fees owed to government. You need to take time to make your own financial situation and goals. You need check on Initial Public Offering (IPO) of Mutual Funds.