What is the difference between a closed-end fund and open-end fund?
A closed-end fund has a set number of shares that trade on a stock exchange (for example, the Toronto Stock Exchange). These shares are sold through an initial public offering, and any subsequent share purchases are done in the secondary market through an investment advisor/firm. The purchase or sale price of a closed-end fund share is the market price, which can be above the Net Asset Value (NAV) (called a premium) or below the NAV (called a discount), depending on the perceived value of the fund’s shares. An open-end fund continuously offers and redeems shares based on the inflow or outflow of investors. Shares of an open-end fund do not trade on any exchange. The purchase or sale price of an open-end fund share is NAV plus or minus any fees that may be applicable.
