​Mutual funds can be broadly categorized into open-ended and closed-ended schemes, based on how they are structured and traded. Here's how they differ:

Open-Ended Mutual Funds
Open-ended funds allow investors to buy and sell units at any time, even after the fund's initial launch. These transactions are executed at the fund’s Net Asset Value (NAV), which is calculated at the end of each trading day based on the current value of the fund’s underlying assets. The fund continuously issues new units when investors buy in and redeems units when investors sell. There is no limit on the number of units the fund can create, offering liquidity and flexibility to investors.

Closed-Ended Mutual Funds
Closed-ended funds have a fixed unit capital and are launched through a one-time New Fund Offer (NFO). After the NFO period ends, new investors cannot buy units directly from the fund. Instead, units are listed and traded on stock exchanges, and investors can buy or sell them in the secondary market. The market price of these units may differ from the NAV due to supply and demand dynamics. Closed-ended funds typically have a fixed maturity period, and investors can exit only by selling in the market or by waiting until maturity.

In summary, open-ended funds offer continuous buying and selling flexibility directly with the fund house, while closed-ended funds operate with a fixed number of units that are traded on the exchange after the initial offering.


To read more on different types of Mutual Funds, click here.​