Types of Mutual Funds

Open ended fund
In an open-end fund, the units of a mutual fund are bought and sold by the fund company itself. The price at which you buy this fund is usually higher than the price at which you can sell the fund to the fund company. In this mutual fund, there are no restrictions on the amount of shares the fund can or will issue. Depending upon the demand, the fund continues to issue shares no matter how many investors there are. In this case, the fund companies also give option to the investors to buy back their shares when investors wish to sell. Mostly mutual funds are open-end funds and they are more conservative and provide consistent returns. Generally, Open-end funds are managed actively and are priced according to their net asset value.

Closed ended fund
Unlike an open-end fund, where the buying and selling of funds are conducted by the fund company itself, the units of close-end funds are traded on a stock exchange. The market price of the shares in closed ended fund is determined by supply and demand and not by net-asset value (NAV).

Load
This is the total price of buying a unit of a mutual fund. It is actually a kind of fee or commission charged to an investor when buying or redeeming shares in a mutual fund. Mostly funds sell units at a premium to its underlying NAV, and purchase them at NAV. When the fund company charges a load while selling its units, it is called entry load. When it charges a load at the time of buying the units back from an investor, it is called exit load. Most mutual funds today carry some load, since there is always a cost incurred in the operation of the fund and as a result of numerous shareholder transactions. Sometimes, though this load thing acts as a burden for investors and is very effective in discouraging them from trading the mutual fund in short-term or using it for purposes other than investment. It is also a source of income for the Asset Management Company which operates the mutual fund.

Demat securities

What is Lending and Borrowing of Securities?
If any person required to deliver a security in the market does not readily have that security, he can borrow the same from another person who is willing to lend as per the Securities Lending and Borrowing Scheme.

Can lending and borrowing be done directly between two persons?
No. Lending and borrowing has to be done through an ‘Approved Intermediary’ registered with SEBI.

Can I lend the securities lying in my account?
Yes. You can lend your securities through Approved Intermediaries registered with SEBI.

How an investor can participate in lending and borrowing of security?
You may enter into an agreement with the approved intermediary to be a lender under this scheme. After that, you may lend securities any time by submitting lending instruction to your DP.

How would I lend my demat securities?
Intermediary may return the securities at any time or at the end of the agreed period of lending. Intermediary has to repay the securities together with any benefits received during the period of the loan.

Can lending and borrowing be done through CDSL demat account?
Yes. CDSL system is being enabled to undertake lending and borrowing of securities through demat account opened with it.

How would I receive the corporate benefits which would accrue on these securities during the period of lending?
The benefits will be given to the Intermediary/borrower. However, whenever the securities are being returned / recalled. Intermediary/borrower will return the securities together with benefits received.

What is transmission of demat securities?
Transmission is the process by which securities of a deceased account holder are transferred to the account of his legal heirs / nominee. Process of transmission in case of dematerialised holdings is more convenient as the transmission formalities for all securities held in a demat account can be completed by submitting necessary documents to the DP