What are open-end and closed-end funds?
Most Canadian funds belong to one of two groups: open- or closed-end. The vast majority of mutual funds are open-end. Open-end funds are similar to closed-end funds in one respect: they allow an investor to own a piece of a portfolio of securities. Open-end funds sell units on demand. When an investor invests money in an open-end fund, new units are issued directly by the fund. There is no limit to the number of units available. Units of an open-end fund can always be redeemed for the NAVPS. Keep in mind that this is rarely the price at which the units were purchased. There is also an assortment of closed-end funds available for purchase. They have a fixed number of units, which are generally traded like shares on a stock exchange. Closed-end funds also have a NAVPS, but a distinguishing feature of this type of fund is they do not necessarily trade at the NAVPS. In fact, their trading value is frequently less than their NAVPS. In this instance, when a closed-end fund is trading at a “d
