What is the difference between open-ended and closed-ended mutual fund schemes?

Mutual Funds are categorized on the basis of various parameters such as risk appetite, investment style, etc. Apart from this, schemes are also classified as open-ended and closed-ended depending on the flexibility in sales and purchase that these funds offer to the investors.

Open-ended Mutual Funds: These types of schemes are open for subscription even after the NFO period. An investor can make an investment or redemption from the scheme anytime. The units are bought or sold at NAV (Net Asset Value) prices.

Closed-Ended Mutual Funds: As the name suggests, these mutual funds are closed for the subscription after the NFO period. Unlike open-ended schemes, an investor can neither sell or purchase the units until the maturity. Also, the closed-ended schemes have limited number of units for the investors.

In an open-ended scheme, an investor gets the privilege to invest or withdraw his participation from the scheme anytime whereas in closed-ended scheme, an investor can only buy the mutual funds in the NFO period and can only redeem from the scheme after maturity.

Also, STP, SWP, and SIP options are also not supported by closed-ended mutual fund schemes.