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Close ended schemes

Updated on March 16, 2023

A Close ended scheme refers to a mutual fund in which the investment is locked-in for a specified period of time. Investment in a close ended scheme can be done only during the New Fund Offer period (NFO). The units can be redeemed once the lock-in period or the tenure of the scheme is over.

What are the features Close ended schemes?

Some features of Close ended schemes are:
a) Liquidity in these schemes is available only after the specified lock-in period ends or once the fund matures.
b) Redemption proceeds for close ended schemes are received only after the mandatory lock-in period is over.
c) Investment in these schemes can only be done during the New Fund Offer (NFO) period.

What are the benefits of close ended schemes?

Some benefits of close ended schemes are:
a) These schemes are good for long term investors who do not have liquidity issues.
b) Investors who do not want to monitor market performance of their investments can choose close ended schemes.

What are the limitations of close ended schemes?

Some limitations of close ended schemes are:
a) There is no SIP option available in these schemes.
b) Investors cannot analyse or research as there is no track record available for close ended schemes.
c) Averaging during down markets is not possible for these schemes.