Mutual Funds are classified as Open-end, Closed-end and Interval Funds
Open-end schemes are open for investors to enter or exit at any time, even after the NFO. Although some unit-holders may exit from the open-end scheme, wholly or partly, the scheme continues operations with the remaining investors. The scheme does not have any kind of time frame in which it is to be closed
Closed-end funds have a fixed maturity. Investors can buy units of a closed-end scheme, from the fund, only during its NFO. The fund makes arrangements for the units to be traded, post-NFO in the stock exchange/s. This is done through a listing of the scheme in one or more stock exchanges. Such listing is compulsory for closed-end schemes
Interval funds combine features of both open-end and closed-end schemes. They are largely closed-end, but become open-end during pre-specified time periods. For instance, an interval scheme might become open-end between January 1 to 15, and July 1 to 15, each year. The benefit for investors is that, unlike in a purely closed-end scheme, they are not completely dependent on the stock exchange to be able to buy or sell units of the interval fund. There is a transaction period (January 1 to 15 and July 1 to 15, in this example), when both subscription and redemption may be made to and from the scheme). Transaction period has to be of minimum 2 working days, as per SEBI Regulations. The gap between two successive transaction periods (January 15 to July 1, in this example) is called interval period. The minimum duration of an interval period is 15 days. Subscription and redemption is not permitted during the interval period.
Funds are further classified on the basis of their management style - Actively Managed Funds and Passive Funds
Actively managed funds are funds where the fund manager has the flexibility to choose the investment portfolio, within the broad parameters of the investment objective of the scheme.
Passive fund invests on the basis of a specified index, whose performance it seeks to track. Thus, a passive fund tracking the S&P CNX Nifty or BSE Sensex would buy only the shares that are part of the composition of that index. The proportion of each share in the scheme's portfolio would also be the same as the weightage assigned to the share in the computation of the index.
The index, on which a passively managed scheme is constructed, is called its benchmark. Similarly, even active schemes have a benchmark – a standard against which scheme performance can be compared. A benchmark is announced when every scheme, active or passive, is launched.
Finally the schemes are classified on the basis of their Asset Class : Equity, Debt & Hybrid Funds
A scheme might have an investment objective to invest largely in equity shares and equity related investments like convertible debentures such schemes are called equity schemes.
Schemes with an investment objective that limits them to investments in debt securities like Treasury Bills, Government Securities, Bonds and Debentures are called debt funds or income funds.
Hybrid funds have an investment charter that provides for a reasonable level of investment in both debt and equity.
How to compare the scheme performance ?
Scheme performances are judged by lot many factors but a common investor can judge the scheme primarily with its past returns and also on the basis of the assigned benchmarking
Following are the assigned benchmarks for various scheme in Mutual Fund :
||Relevant for (Type of scheme)
||S&P CNX Nifty
||National Stock Exchange
||Sensex Bombay Stock Exchange
||Mumbai Inter-bank Offered Rate (MIBOR)
||National Stock Exchange
||Liquid Fund Index (Liquifex)
||Composite Bond Fund Index (Compbex)
||Income / Debt
||Balanced Fund Index (Balance Ex)
||MIP Index (MIPEX)
||Short Maturity Gilt Index (Si-BEX)
||Gilt schemes of short maturity
||Medium Maturity Gilt Index (Mi-BEX)
||Gilt schemes of medium maturity
||Long Maturity Gilt Index (Li-BEX)
||Gilt schemes of long maturity
||Composite Gilt Index
||Composite gilt schemes
For comparing schemes on the basis of its historic returns and performances , do make the selection and check :
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