OPEN-ENDED MUTUAL FUND. What is open-ended mutual fund?

 

An open-ended mutual fund is a type of investment fund that issues and redeems shares on a continuous basis, meaning investors can buy or sell shares at any time. These funds do not have a fixed number of shares, and their capitalization can increase or decrease as investors enter or exit the fund. Open-ended mutual funds are managed by investment companies or fund managers, who make decisions on how to invest the fund's assets based on its stated investment objectives.

Key features of open-ended mutual funds include:

1. Liquidity: Investors can buy or sell shares of the fund on any business day at the net asset value (NAV) price, which is calculated at the end of each trading day.

2. Continuous Buying and Selling: The fund can issue an unlimited number of shares to meet investor demand. Conversely, it can buy back shares from investors who wish to sell.

3. Professional Management: The fund is managed by professional portfolio managers who make investment decisions based on the fund's objectives. Investors benefit from the expertise of these professionals.

4. Diversification: Open-ended mutual funds typically invest in a diversified portfolio of securities, which helps spread risk across different assets.

5. NAV (Net Asset Value): The price per share of an open-ended mutual fund is calculated based on the fund's total assets minus liabilities, divided by the number of outstanding shares. This is known as the NAV, and it represents the per-share value of the fund.

Open-ended mutual funds are commonly used by individual investors as a way to access a diversified portfolio without the need for significant capital. They are suitable for investors who prefer liquidity and flexibility in managing their investments. Investors can choose from a variety of fund types, including equity funds, bond funds, balanced funds, and more, based on their financial goals and risk tolerance.

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