Open ended mutual funds in India are a popular choice for investors seeking flexibility and growth. Unlike closed-ended funds, they allow entry and exit anytime, with no fixed maturity. With mutual fund AUM at ₹65.74 lakh crore in 2025, per AMFI, these funds dominate. What makes them special? Let’s dive in.
What Are Open Ended Mutual Funds?
Open ended mutual funds in India pool money to invest in stocks, bonds, or both, with no limit on units issued. Investors can buy or sell units at the Net Asset Value (NAV) daily. Unlike closed-ended funds, which have a fixed maturity period and are traded on stock exchanges, open-ended funds offer continuous liquidity. This makes them a popular choice for both new and seasoned investors.
Key Benefits:
- Liquidity and Flexibility: One of the primary advantages of these mutual funds is their liquidity. Investors can redeem their units at the prevailing Net Asset Value (NAV) on any business day. This flexibility thus allows investors to access their funds as needed, without being bound by a fixed maturity period.
- Diversification: These funds typically invest in a diversified portfolio of stocks, bonds, or other securities. This diversification also helps spread risk and can lead to more stable returns over time. For instance, equity-oriented open-ended funds may invest across various sectors. This reduces the impact of poor performance in any single sector.
- Systematic Investment Plans (SIPs): Investors can invest in these mutual funds through SIPs, which allow for regular, disciplined investments. SIPs are particularly beneficial for long-term wealth creation. They are accessible to investors with varying risk appetites and financial goals.
Taxation of Open Ended Mutual Funds:
The tax treatment of open-ended mutual funds in India depends on the type of fund—equity or debt—and the holding period.
- Equity Funds: If you hold units for more than one year, LTCG are taxed at 10% beyond the ₹1 lakh exemption limit. STCG on units sold within one year are taxed at 15%.
- Debt Funds: Gains from debt funds are taxed based on the investor’s income tax slab. LTCG arise if the units are held for more than three years, and are taxed at 20% with indexation benefits.
Considerations Before Investing:
- Market Risk: The NAV of these funds fluctuates with market conditions, and past performance does not guarantee future results.
- Expense Ratio: Management fees and other charges can impact net returns.
- Exit Load: Some funds impose a fee if units are redeemed within a specified period, typically up to one year.
- Tax Implications: Gains from equity funds are subject to capital gains tax, with long-term gains above ₹1 lakh taxed at 10%, while debt funds are taxed based on the investor’s income tax slab.
Conclusion:
Open Ended Mutual Funds in India offer a flexible, diversified, and tax-efficient investment option for both new and seasoned investors. With the ability to invest through SIPs and the potential for long-term growth, they cater to a wide range of financial objectives. These suit beginners, salaried folks, and long-term planners also. Ready to build wealth? Explore more fund insights now!
– Ketaki Dandekar (Team Arthology)
Read more about Open Ended Mutual Funds here – https://www.investopedia.com/open-ended.asp