Most of us have heard about the open ended and close ended mutual funds. Interval mutual funds are a confluence of the open-ended and close ended mutual fund features and constitute benefits of both types of mutual funds.
The feature of open-ended schemes is that the units of the open-ended scheme can be freely redeemed and purchased or bought and sold at the stock market very much like the equity stocks. Investors in the open-ended mutual fund schemes can choose to increase or decrease the units in the mutual fund plan whenever they choose to. In contrast the close-ended mutual fund schemes cannot be redeemed in any part or whole before the culmination of the plan tenure. Investors in close-ended schemes get the lump sum amount at the end of the tenure.
Interval mutual fund scheme structures constitute a blend of the flexibility of the open-ended schemes and the rigidity of close-ended schemes in the sense that interval mutual funds cannot be redeemed freely and have defined periods when redemption, sale or purchase of the plan units are possible. These definite periods can be monthly, quarterly, half yearly or annually. However at present most top interval mutual fund schemes are offering quarterly open periods. The interval mutual funds can be listed on stock exchange and redemption, purchase or sale is on NAV of the fund units. In other words index mutual funds are the types of mutual funds that have pre-defined periods of closure and openness.
Interval Mutual Funds and Fixed Maturity Plans
A type of mutual fund that had become popular and still remains a preferred investor option of many are the fixed maturity plans. Interval mutual funds which are a type of new age mutual fund offered by the top mutual fund companies is often compared with the fixed maturity plans on the basis of the similarities that exist between these two types of mutual funds. FMPs typically have short tenure span of one year and no part of the plan can be redeemed and neither the principle invested amount increased before the plan matures. Redemption and withdrawal in FMP type of mutual fund is only possible after the plan matures.
Portfolio of Interval Mutual Funds
Interval Mutual Funds like other types of mutual funds invest in the stock market instruments of debt and equity, yet most interval funds have more of debt composition or entirely a debt based composition since these are essentially types of mutual funds with short tenure. One underlying difference of interval mutual fund portfolio with the portfolio of other types of mutual funds is that interval mutual funds besides investing in the capital market instruments of debt and equity also invest in non-conventional investment avenues which are not listed in the stock exchanges. These non-conventional investment sources can be non-listed businesses in the retail, infrastructure and nonconventional sectors like forestry that indicate high growth potential.
Benefits of investing in Interval Mutual Funds
Interval mutual funds offer liquidity, security, appreciation and flexibility to investors. Since interval mutual funds invest mainly in debt instruments they are secure and suitable for investors with low-risk preferences. Interval mutual funds invest in non-conventional as well as conventional instruments and provide an avenue for secure investments in promising non-conventional ventures and businesses. When investors invest through asset management companies rather than going solo they enjoy better security of investments as the accredited ASM companies ensure all security and legal measures to protect the money of investors.
Interval mutual funds have short tenures of closure and during the open periods investors are free to redeem as many units or take up more units of the interval mutual fund scheme. Interval mutual funds can be listed on the stock exchanges and traded like capital market stocks during the open periods.
Interval mutual funds offer returns comparable with the FMPs or short term debt based types of mutual funds of around 8% to 10 %.
Taxation of Interval Mutual Funds
Interval mutual funds are taxed like debt funds if the fund portfolio constitutes 65 % or more proportion of debt securities. On the other hand if an interval fund scheme portfolio constitutes 65 % or more proportion of equity holdings then the fund is taxed like an equity fund. Returns from debt funds and equity funds are taxed differentially u/s 10 as per short term and long term capital gains taxation rates, indexation benefits apply for both.
Top ranking Interval Mutual Funds
The top ranking interval mutual funds are mainly in the quarterly interval fund categories. The five-year returns of the top performing interval mutual funds is around 9.5% to 9%, the average three-year returns are about 8% to 8.5% and the average one-year returns between 6% to 7.5 %. As per latest industry reports the top ranking interval funds are as fore mentioned (not in order of ranking):
Interval funds by Reliance
Series-I-Growth-quarterly interval fund
Series-II-growth-quarterly interval fund
Interval funds by UTI
Fixed income- retail growth-quarterly interval plan I
Series-II-fixed income- growth-quarterly interval plan IV
Series-II-fixed income-retail growth-quarterly interval plan VI
Series-II-fixed income-retail growth-quarterly interval plan VI
Series-II-fixed income-retail growth-quarterly interval plan VII
Fixed income-retail growth-quarterly interval plan III
Interval fund by Aditya Birla Sun Life
Quarterly Series-I-retail growth-interval income fund
Purchasing interval mutual funds online
Find out all about the top performing interval mutual fund plans on the mutual fund aggregator portal. The portal is state of the art and offers a rich and seamless search experience. Investors who prefer mutual fund investments or frequently invest in the different types of mutual funds can find out all about the mutual fund plans through the mutual fund aggregator portal. The online calculator on the aggregator portal can be used to get quotes and estimates on the different types of mutual funds within seconds. The portal is supported by the standard softwares and can be accessed all time by the online investing public through the handheld devices, tabs or larger digital devices like laptops and desktops.
