Features of an Interval Fund
1. Risk: Interval funds are not really useful in an emergency. They are completely non-liquid. They cannot be redeemed on any secondary market. Even if an investor is willing to pay the exit load, he/she cannot exit before or after the time period specified.
2. Returns: When it comes to returns, interval funds are not the best choice. The majority of interval funds in India offer an annualised 5-year return of 6% to 8.5%. When compared to other types of funds, their returns are quite modest when translated to shorter time periods.
3. Investment Horizon: Interval funds are mostly used to achieve short-term objectives. Investors with investment horizons that correspond to the maturity dates of interval funds can invest in them for short-term returns. You must have certain goals in order to use the lumpsum that interval funds provide upon maturity.
4. Financial Goals: Interval funds are best suited for investors who are unsure about the duration of their investment since they are essentially fixed income schemes. They are also appropriate for investors looking for lump sum amounts at a set period of time. Investors can accomplish this by aligning their horizon with the time interval during which redemption is allowed. Furthermore, since they are mostly debt-oriented, they are unable to provide particularly high returns. therefore, these funds are best suited for investors with a low-risk appetite.