Want to make money via mutual funds investment? Empower yourself with this knowledge first
The common man looks at mutual funds as a way to make more money from their investments than they can from traditional ones.
The common man looks at mutual funds as a way to make more money from their investments than they can from traditional ones like gold, bank FDs, PPF, EPF and other similar options. The idea is to benefit from a collective fund being managed by a fund manager who can give it complete and total attention in a professional manner. The idea is to get rich. However, before taking the first step, investors must understand a crucial difference between funds on offer. This knowledge will empower them to take the right decision based on their own needs and personal outlook.
So, let us start with the options available. Mutual funds investments have two types of schemes — open-ended funds and closed-ended funds. Both are customised in such a way that they will give good returns, However, while closed-ended funds enforce financial discipline with lesser liquidity, open-ended funds provide full freedom to the mutual fund investor. According to the investment experts, investors can enter any time in the open-ended funds and can exit at their will, while in close-ended funds, there is a certain time-limit within which they can enter and once inside, they are bound to remain invested till the maturity period.
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Speaking on the difference between closed-ended and open-ended mutual funds Kshitij Mahajan, Co-founder at Complete Circle Foundation said, "An investor has more liquidity and freedom in open-ended funds while in close-ended funds, an investor has to invest one time and wait till the maturity of the investment. In close-ended mutual funds, there is a certain time in which one has to invest a lump sum amount while in the open-ended funds, one can invest any time and can choose any of the SWP, SIP or any other mode."
Mahajan went on to add that close-ended mutual funds are issued through NFO (New Fund Offer). An investor can't sell off one's fund before the maturity and its units are listed on the stock exchange. Close-ended funds are insulated from the market sentiments as the fund manager is clear about the availability of the funds to them and hence they have a larger outlook about their investment. "One has only one option to invest in close-ended funds that is a one-time investment which is not conducive for the salaried individual as mutual funds SIP is more preferred option for them and hence they generally shy from investing in close-ended mutual funds," said Mahajan.
Now that you know, pick the option that suits you best and invest! There is money to be made and it will not happen till you take that first step.