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Should I invest in closed-end funds?

Dhirendra Kumar shares his view on why investors should stay away from closed-end funds

What is your opinion about FMPs? I have invested in FMPs like ABSL Resurgent 7, HDFC HOF 1 and ICICI Value Series 19. Since all these schemes are performing badly, what is in store for me?
- Rajendar Kumar Gaur

These are not FMPs. These are closed-end equity funds. Most investors should stay away from such funds. We invest in mutual fund schemes based on their track records. Here, you don't have the track record and your money also gets locked. It is entirely about the incentive structure, as well as the pricing system, because of which the closed-end funds are sold. Most investors are disappointed with these funds.

You also don't have a way out because your investments are doing poorly and you can't do anything about it. You have to wait till redemption and make sure that you never invest again in a closed-end fund.