Written by Upstox Desk
8 min read | Updated on July 31, 2025, 18:25 IST
All That You Need to Know About Open-Ended Mutual Fund
What Is Open-Ended Mutual Fund?
Types of Open-Ended Mutual Funds
Features of Open-Ended Mutual Funds
What Is the Difference Between Open-Ended and Close-Ended Mutual Funds?
Benefits of Open-Ended Mutual Funds
Conclusion
Frequently Asked Questions (FAQs)
Upstox is a leading Indian financial services company that offers online trading and investment services in stocks, commodities, currencies, mutual funds, and more. Founded in 2009 and headquartered in Mumbai, Upstox is backed by prominent investors including Ratan Tata, Tiger Global, and Kalaari Capital. It operates under RKSV Securities and is registered with SEBI, NSE, BSE, and other regulatory bodies, ensuring secure and compliant trading experiences.
When investing in mutual funds, a big concern of most investors is how "liquid" or "locked-in" their money will be. Liquid funds (debt and money market funds) allow investors quick access to their funds. But with some limitations in terms of the types of companies they can hold, they can achieve a different goal than a long-term investor.
On the other hand, open-ended funds continuously offer shares to new investors and redeem shares from existing investors. Mutual funds can be created in several shapes and sizes to meet the needs of different investors. Open-ended mutual funds are one such product type.
Open-ended mutual funds are those funds that can issue or redeem units of the respective fund as and when the fund house decides to meet the demand and supply of units. The units of open-ended mutual funds are traded in the secondary market through stock exchanges. Open-ended funds are also known as 'Public Mutual Funds.
An open-ended mutual fund is a collective investment scheme that offers its units for sale to the public. The NAV of these schemes depends on the demand and supply of units. The price at which the fund sells its units is called the Net Asset Value (NAV).
The NAV of an open-ended mutual fund is calculated by dividing the total value of all the investments made by investors in a particular scheme by the total number of units issued by the plan. This is done daily, and investors are given a net asset value statement every month or quarter depending on when an investor purchases or redeems their units from the fund.
Investors can buy or sell units of open-ended mutual funds anytime during market hours through their broker or directly from the distributor/distributor bank. If an investor buys more than INR 100,000 units in one transaction, they will have to register themselves with SEBI as an MF distributor.
Open-ended mutual funds are mutual funds that can be bought and sold throughout their life. They differ from closed-end funds (CEFs) because a fixed number of shares does not issue them.
There are two types of open-ended mutual funds:
There are two main kinds of open-ended mutual funds: no load and load. No load mutual funds don't charge sales charges (called loads), while load mutual funds charge sales charges.
Open-ended mutual funds' main feature is that they can be purchased or sold anytime by investors. No matter when you buy into an open-ended fund, you can sell out anytime. They are also known as equity funds because they invest in equities that investors can buy and sell through stock exchanges like BSE and NSE.
The value of these shares may rise or fall depending on the performance of the company concerned. The return from open-ended mutual funds depends on whether there is any gain from selling units under the scheme. If there is no gain, then there will be no tax liability for capital gains arising from the sale of units under such schemes.
But if there is any gain, then it would be taxable as per your income tax slab rates for long-term gains (more than one year) or short-term gains (less than one year), depending on how long you have held them before selling them off in your portfolio. Open-ended mutual funds can issue or redeem the number of unit shares as and when required. They are also known as growth schemes or equity-oriented schemes.
They can sell the units to a person willing to buy them at a price called Net Asset Value (NAV). Investment in open-ended mutual funds requires no minimum amount compared to other types of mutual fund schemes. The investors can make a small investment every month, every quarter or even once a year, depending upon their requirements.
The investors can redeem their units before the maturity date and reinvest the amount at any point before the maturity date. There is no exit load for redeeming units before maturity. However, some administrative charges might be levied by the fund house if redeemed after three years from the purchase date.
Still, these charges are nominal compared to other aggressive schemes like equity-linked saving schemes (ELSS), where an exit load of 1% is redeemed within the first two years from the purchase date.
The main difference between open and closed-ended mutual funds is that the latter issue a fixed number of shares, while open-ended funds issue new shares when demand increases and redeem shares when demand decreases. Open-ended funds are more flexible than closed-end funds because they can adjust their portfolios based on investor demand rather than have all their assets in one investment type, such as stocks.
Open-ended mutual funds are mutual funds that issue shares to investors. These funds have no restriction on the number of shares that can be issued. As a result, there is no closing date and no limit on the total amount that can be raised. Closed-end mutual funds cannot issue more shares after the original offering period has ended.
The stock exchange where they trade may impose restrictions on how many shares they give over time, but they will only be able to issue what was sold during their initial public offering (IPO). Another significant difference between open-ended and close-ended mutual funds is that open-ended funds do not have a predetermined number of shares or a predetermined price per share.
Investors who buy into an open-ended fund can buy as many or as few shares as they want at any time - there is no minimum purchase requirement like there is with closed-end funds. While closed-end funds are somewhat limited in raising capital (they must sell their entire portfolio before issuing new shares), open-ended mutual funds have no limitations.
There are several benefits associated with open-ended mutual funds, including:
Open-ended mutual funds is an entities through which the MF company offers numerous schemes classified under different categories and investment objectives. Investors have a wide range of options to suit their personal needs. Since there are various schemes, the investor can invest in the scheme according to their time frame and goals.
A mutual fund's Net Asset Value (NAV) is the total value of all the stocks, bonds, and cash the fund owns. It's calculated by adding the individual securities' prices and then dividing by the number of shares outstanding in the fund.
The operating expense ratio is a percentage of assets the fund manager charges to cover operating costs such as salaries, marketing expenses and legal fees. This percentage is disclosed in the prospectus for each fund and varies from one fund to another depending on how much management charge it takes to run your investment account.
The Exit Load is the percentage of the investment amount that an investor has to pay in case of premature withdrawal. In other words, it is the penalty for withdrawing their investment before the lock-in period is over**.**
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Upstox Desk
Upstox Desk
Team of expert writers dedicated to providing insightful and comprehensive coverage on stock markets, economic trends, commodities, business developments, and personal finance. With a passion for delivering valuable information, the team strives to keep readers informed about the latest trends and developments in the financial world.
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