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The Indian market has begun to realise the potential of mutual funds as the most advantageous avenue for exposure to equities. Mutual funds are going to be your money partner for the rest of your life. It is worthwhile to spend a little time for understanding some basics related to mutual funds. We have already touched upon the types of Mutual Funds on the basis of the investment objectives (Equity, Debt, Gold, etc.). Another distinction in Mutual funds is based on the length of time for which the fund is collecting money. The two categories are Open-ended and Closed-ended funds. An Open-ended fund has a perpetual lifespan-Ended and you can invest in the fund or redeem your investments at any time. As inflows are unlimited and, typically, unrestricted, there is no limit to what the corpus can grow to. At present most AMCs prefer to launch has funded as it helps the AMC garner money A close-ended fund restricts the inflows to a specified period. They are open for subscription for a few days from the date of their launch. The Fund stops accepting funds from the public, once the subscription period ends. However, to ensure liquidity, the fund houses list their closed-ended schemes on a stock exchange. The number of outstanding units of a closed-ended fund does not change as a result of trading on the stock exchange. Apart from listing on an exchange, these funds sometimes offer to buy back the units, thus offering another avenue for liquidity. SEBI regulations ensure that closed-ended funds provide at least one of the two avenues to investors for entering or exiting.
