What are open-ended mutual funds?
Open-ended mutual funds do not have a restriction in terms of the number of units they can issue. Although, if an open-ended mutual fund becomes too big, then the fund manager can choose to not accept any more subscriptions from investors.
In an open-ended mutual fund, an investor can buy units in the fund directly from the fund itself. All mutual funds, including open-ended mutual funds, are actively managed by fund managers who charge investors a small fee for their services. An investor can buy or sell units in these mutual funds even after the initial offering period is over.
Most mutual funds are open-ended, which means an investor can buy or sell them at any point. Since investors can redeem their investments in an open-ended mutual fund whenever they want, such funds have to maintain a certain amount of cash reserves to meet these redemptions.All units in an open-ended mutual fund are bought and sold at the net-asset value declared by the mutual fund.