Difference Between Open Ended & Close Ended Funds

Open ended fund and closed ended fund are types of mutual fund, which are collective investment Parkway. A mutual fund is a diversified investment plan in which a group of shareholders shares a fund and it is managed by experts.



Open ended fund

  • An open ended fund is the type of mutual fund in which an investor can enter and exit whenever he wants. 
  • In an open-ended fund, the capital invested is endless and there is no tenure for its redemption, so it is perpetual by nature. 
  • An open ended fund is available anytime to anyone for subscription and repurchase. It means it has no time limit for buying and selling. 
  • An Open ended fund can be bought from the initial public offer or from a secondary market like stock exchanges. 
  • An open ended fund deals with the net asset value which is calculated at a regular interval like annually. 

Closed-ended fund

  • As the name suggests, a closed-ended fund has a fixed tenure, once the time limit over it will automatically redeem after that particular time 
  • An investor can invest in it during the initial public offer only. It cannot buy from the stock exchanges. 
  • In closed-ended, the fund invested by an investor for a short period because a closed-ended fund has short life span. 
  • A value of a closed ended fund is defined by the demand and supply. 
  • At the time of redemption of a closed ended fund, the total amount realized is distributed among the investors as per their investment

Open-Ended Fund v/s Closed Ended Fund

Basis
Open ended fund
Closed ended fund
Meaning
An open ended fund is the type of mutual fund in which an investor can enter and exit whenever he wants. It is a plan which continuous infinite.
As the name suggests, a closed-ended fund has a fixed tenure which is for a short duration.
Nature
By nature, an open ended fund is perpetual.
Closed ended fund is finite in nature.
The Redemption period
Open ended fund has no fixed redemption period.
A Closed ended fund has fixed redemption period.
Value
A value of an open ended fund is determined by the net asset value.
In the closed ended fund, a value is defined by the demand and supply force.
Trading
In open ended fund, an investor can buy and sell it from the initial public offer and from stock exchange also.
In the closed ended fund, an investor can invest or subscribe for the period of the initial offer, once the initial public offer is over no possibility to invest in it.
Listing on the stock exchange
Open ended fund is not listed on the stock exchange.
A Closed ended fund is listed on the stock exchange.
Transaction time
Open ended fund is executed on daily basis.
The closed ended fund is executed on real time basis.


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