A close-ended mutual fund is a type of mutual fund scheme that is open for subscription only during its launch period, also known as the New Fund Offer (NFO).
This means investors generally cannot purchase additional units directly from the fund house after the subscription period closes.
These funds usually come with a fixed maturity period.
Close-ended mutual funds are generally listed on stock exchanges, and investors can buy or sell their units through the exchange during market hours, subject to market liquidity.
The units are held in a demat account, which means investors need a trading and demat account to invest in close-ended mutual funds.
For example, Fixed Maturity Plans (FMPs) are a type of close-ended mutual fund because they are open for subscription only during the NFO period and are generally traded on stock exchanges after the subscription window closes.
Before investing, investors should understand that close-ended mutual funds may have lower liquidity compared to open-ended mutual funds.
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