If we were to classify funds structurally or on the basis of their maturity period, we may look at them as either open-ended or closed-ended. There are significant differences in the structure and how investors buy and sell them.
Which one do I pick?
Open-ended schemes give you several benefits like the capacity to diversify your investment, maintain them according to your risk appetite and liquidity, by enabling one to redeem from their investments at any time**.**
A common misunderstanding is that a close-ended funds (CEF) is a type of traditional mutual fund or an exchange-traded fund (ETF). A closed-end fund is an investment structure (not an asset class). Closed-ended funds are traded real time just like any additional stock on an exchange. Investors who have a long term investment horizon and do not need the invested money during that horizon should invest in closed-ended funds. The lock-in condition of the fund negates the possibility of any impulsive decision during times of unstable market conditions.
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Mutual Fund investments are subject to market risks, read all scheme related documents carefully.