In India, Mutual funds first came into limelight in 1963. They are nothing but professionally managed investment funds which has capacity to pool money from lots of investors to purchase securities. Mutual funds are mostly applied to open-end investment companies. Mutual funds have both disadvantages and advantages as like the two faces of a coin. Now a day mutual funds plays a very crucial role in household finances and retirement planning.
Mutual Funds Classification
Mutual funds are classified into three types as open-end funds, unit investment trust and closed-end funds. The most commonly used is open-end funds. Lets us discuss these types of mutual funds 2017:-
Open-ends funds are the funds that must be willing to buy back their shares from the investors. Open-end funds mostly sell their share to public every day. This is one of the most common types of mutual funds. At the end of 2015, there were about 8,116 open-end funds in US and the combines asset of those funds were approximately $15.7 trillion.
We can define the closed-end funds as the funds who issues shares to public only once. The shares of closed-end funds are listed for trading on stock exchange. The investors, who are not interested to invest in funds, can’t sell their shares back to fund. It means that they have to sell their shares to another investor in the market.
Unit Investment Funds
This type of mutual funds can only issue to public once after being created. Unit investment funds have very limited life span and these types of funds do not have any professional investment manager. If you are an investor then you can redeem your shares directly with funds or we can say that you can sell your shares in open market.