Page 244 - DCOM507_STOCK_MARKET_OPERATIONS

Unit 12: Mutual Fund

12.3 Types of Mutual Fund Schemes Notes

A wide variety of mutual fund schemes exists to cater to the needs such as financial position, risk
tolerance and return expectations etc. The following points below gives an overview into the
existing types of schemes in the industry.
By Structure

Open-ended schemes
Close-ended schemes
Interval schemes
By Investment Objective

Growth schemes
Income schemes
Balanced schemes
Money market schemes

Other Schemes
Tax saving schemes
Special schemes
Index schemes

Sector-specific schemes
12.3.1 Grouping of Mutual Funds

Mutual Funds are grouped as under:
Open-ended Funds
In open-ended funds, there is no limit to the size of the funds. Investors can invest as and when
they like. The purchase price is determined on the basis of Net Asset Value (NAV).

Did u know? NAV is the market value of the fund’s assets divided by the number of
outstanding shares/units of the fund.
Close-ended Funds
These funds are fixed in size as regards the corpus of the fund and the number of shares. In close-
ended funds, no fresh units are created after the original offer of the scheme expires. The shares/
units of these funds are not redeemable at their NAV during their life as are in the case of open-
ended funds. The shares of such funds are traded in the secondary market on stock exchanges at
market prices that may be above or below their NAV.

Income-oriented Funds
These funds offer a return much higher than the bank deposits but with less capital appreciation.
The emphasis being on regular returns, the pattern of investments in general is oriented towards
fixed income-yielding securities like non-convertible debentures of consistently good dividend
paying companies, etc.

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