How do mutual funds operate in terms of units?

Mutual funds operate by continuously issuing and redeeming units, which allows investors to buy into or sell out of the fund at any time based on their financial needs and investment strategies. This mechanism provides liquidity to investors, as they can buy or sell units at the current net asset value (NAV) of the fund. The continuous issuance and redemption of units also helps the fund manage its assets more effectively, accommodating the inflow of new investors and the outflow of those redeeming their investments.

This operational model contrasts with mutual funds that would have a fixed number of units or issue them only at specific intervals, which would limit investors' ability to enter or exit the fund at their convenience. Therefore, the continuous process supports dynamic trading and investment flexibility, integral to the functioning of mutual funds in the financial markets.