Mutual funds are seen as a viable income source to live a comfortable lifestyle given the soaring inflation and price of commodities. Therefore, more and more people today are investing in various mutual fund schemes. Mutual funds diversify your investment portfolio and offer attractive returns.
What is close-ended mutual fund?
Considering the increasing rate of interest on mutual fund investments, close-ended mutual funds have emerged as a good investment option. In a close-ended fund, there is a restriction on the number of investors. The fund manager pools the money from different investors and manages the same without any pressure of redemption during the lock-in period.
Here is how you can make the best use of close-ended mutual funds-
- Analyzing the portfolio
There is no real-time analysis or previous record of close-ended mutual funds since these are declared and available during the Initial Public Offering (IPO). This requires you to rely completely on the analysis of the investment portfolio. To ensure that you receive better returns on investment, make sure the portfolio has the right set of securities.
- Considering the low liquidity of the fund
Close-ended mutual funds offer low liquidity of funds. Such mutual funds do not allow you to exit the scheme in case the portfolio underperforms due to the unfavourable market condition.
- Investing a large amount of money
You can make the most of close-ended funds by investing a lump sum. However, you can also choose to invest 5-10% of the amount separately in different schemes instead of putting all your money in a single scheme.
- Receiving differentiated income/objective
In close-ended mutual funds, the investor can invest in funds that offer differentiated income/objective. Such schemes are unique, and you need to time your entry to make the most of it.
Close-ended mutual funds can yield the investor great profits after maturity. However, to make sure you earn maximum returns, keep the above tips in mind.
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