There are two types of mutual funds, which are:

• Open-end mutual funds
• Closed-end mutual funds

Open-ended Mutual Fund

Open-end mutual funds are those where subscription and redemption of shares are allowed on a continues basis. The price at which the shares of open-end funds offered for subscription and redemption is determined by the NAV after adjusting for any sales load or redemption fee. In Pakistan there exists only two open ended mutual funds; National Investment (Unit) Trust (NIT) in the public sector and Unit Trust of Pakistan (UTP) in private sector.

Closed-end Mutual Fund

Closed-end mutual funds are those where the shares are initially offered to the public and are then traded in the secondary market. The trading usually occurs at a slight discount to the NAV.

Over a period of time, the mutual fund managers have developed a variety of investment products to cater for the requirement of investors, having different needs. These include:

Growth Funds
The "growth funds" offer potential for appreciation in share value, while the current income may be low. The fluctuation in share price may also be high. Such funds invest in stocks and have tendency to outperform other funds and other modes of savings over a period of time.

Balanced Funds
The "growth and income funds" or "balanced funds", offer prospects of both moderate appreciation in share value as well as current income. The fluctuation in share price may be low. Such funds invest in stocks, corporate debts and Government paper.

Income Funds
The "bond fund" or "income funds", offer good current income but very little potential for growth. Such funds invest in government paper, bonds issued by municipal or local bodies, corporate debts and in stocks of utility companies, offering regular return.