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5 Things To Know About Interval Funds Before Investing
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What is interval funds?
An interval fund is an alternative type of investment which is classified as a closed-end fund which periodically offers to buy back a stated amount of shares of the fund from the investors at the original Net Asset Value (NAV) at the time of purchase. The investors which buy interval funds are generally looking for high yields. An interval fund is a type of closed funds with shares which do not trade on the secondary market. The fund periodically offers to buy back a percentage of outstanding shares at net asset value. One of the main reason’s investors go for interval funds are because of the high yields that are offered by them. If an investor wants to invest in some tax saving schemes they can opt for ELSS mutual funds.
An interval fund is an alternative type of investment company and they are legally classified as a closed-end fund, which periodically offers to buy back a stated amount of shares of the fund from the investors at the original Net Asset Value (NAV) at the time of purchase. Investors which buy interval funds are generally looking for good returns.
5 things to know about interval funds before investing
1. Interval fund repurchase offers:
At the time of purchase, an interval fund will offer to repurchase a certain percentage of the investor’s shares at set periods known as intervals, at a price which is equal to the fund’s net asset value (NAV). The percentage of repurchase will depend on the fund but typically it will range between 5-25 percent of the amount the investor’s fund assets. This repurchase intervals are commonly on quarterly basis, but they can be bi-annual or annual.
2. Interval fund liquidity and selling shares:
Interval funds are not liquid, which means that these funds cannot be converted into cash. Just like the fund will offer to repurchase a percentage of the fund at intervals, the investor is limited to selling shares at intervals.
3. Interval funds vs. Closed-end funds:
Interval funds are classified as closed-end funds, but they are not the same. Interval funds do not typically trade on the secondary market and they generally trade at the fund’s NAV, while closed-end funds do not share these qualities.
4. Interval fund holdings:
One of the most unique qualities of interval funds is that they tend to invest in a diverse range of assets, which may not be held in other types of funds. Interval funds can be used to invest in illiquid assets and other alternative investment types or securities like business loans or private equity funds.
5. Interval fund expenses:
The expenses for interval funds are higher than open-end mutual funds. Fees and expenses generally vary from fund to fund but an investor can expect to pay a fee of at least 1.5% or higher.
Author Bio:- Swarali Chavan is a finance professor who loves study about market investment instruments. She has written on interval funds. Through this article, she has provided detailed information on all you need to know about interval funds.
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