What is a Unit trust?

What is a Unit trust/ Mutual Fund?
A Unit Trust / Mutual Fund is a Trust in which investors’ money is pooled together to invest in different asset classes such as, equity and fixed income securities. Investors participate in a Unit Trust by purchasing units of the entire pool of assets. The pooled assets are invested by professional managers who manage the units on behalf of the investors.

What is an “open ended” and a “close ended” fund? An open ended fund is a unit trust where investors can purchase or sell units at anytime. There is no restriction on the number of units issued.

Close ended fund is a unit trust opened for subscription only during the initial offer period. These funds usually carry a maturity date. After the offer period is closed, no new units will be issued by the fund management company. The fund manager may provide an exit mechanism to the investors in the fund either through listing in an exchange or through periodical withdrawals.

What are the different types of mutual funds? Equity Funds

There are different types of equity funds and they are,

  • Balanced Funds
  • Growth Funds
  • Index Funds
  • Sector specific Funds
  • Fixed Income Funds


Fixed income funds are categorized based on the type of securities and the tenor of investments. They are,

  • Money Market Fund – Short term Fund
  • Gilt Edged Fund – Invests only in Government Securities
  • Other income Funds – These funds invest in all securities with different maturities.