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Interval Fund vs Close Ended Funds

Interval Fund vs Close-ended Funds

What are Interval Funds?

An interval fund is a type of mutual fund which can be purchased/sold only during a particular pre-decided time. Interval funds invest in both equities and bonds (debt securities). In short, they are a perfect combination of both closed and open-ended funds. Although interval funds are listed on the stock markets, redemption is allowed only during specified periods at the prevailing NAV.

How does an Interval Fund Work?

You cannot purchase/sell units of an interval fund directly from the stock market. They can be redeemed only during specified periods at the prevailing Net Asset Value (NAV). Under an interval fund, your invested amount remains pooled for a fixed tenure and cannot be redeemed before maturity. The underlying assets of an interval fund are decided on the fund’s maturity date. This in return, delivers better returns.

Top Interval Funds for 2020

Here is a list of top 3 interval funds based on the returns:

Fund Name1 year3 year5 year
Reliance Yearly Interval Fund - Series 1 (Nippon India Yearly Interval Fund - Series 1 - Direct Plan)6.85%7.30%7.60%
IDFC Yearly Series Interval Fund - Series II7.01% 7.23%7.59%
UTI Fixed Interval Income Fund - Annual Interval Fund – IV5.33%6.37%7.13%

What are Close-ended Mutual Funds?

You can invest in a close-ended fund only during the time of initial fund offer. The units of a close-ended fund are available for purchase only during New Fund Offer. Once the new fund offer period is over, fresh units of the close ended fund will not be available for purchase.

How does a Close Ended Fund Work?

In a close-ended fund, investors can purchase units of a fund only during the NFO period. The maturity period of the fund is 3 to 4 years and the investors are not allowed to exit the fund before the maturity of the scheme.

Close-ended funds can be traded in the stock market like any other security. The price of the units can vary as per the market fluctuations. Investors who want to exit the fund before maturity can sell their units on the stock market.

Top Close-ended Funds for 2020

Here is a list of top 3 interval funds based on the returns:

Fund Name1 year3 year5 year
SBI Small Cap Fund 22.51%13.29%13.29%
Mirae Asset Emerging Bluechip Fund20.44%13.68%15.31%
Canara Robeco Emerging Equities Fund17.02%12.35%12.94%
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