What is the difference between a closed-end mutual fund and an open-end mutual fund?
Closed-end funds and open-end funds are distinguished by the manner in which investments and liquidations are made. Open-end mutual fund companies sell shares at the net asset value to investors, and agree to buy shares back from investors upon demand at the net asset value. Therefore, the number of shares outstanding is subject to change. A closed-end mutual fund offers a set number of shares to the public in an initial public offering, just like a stock. When the initial shares are sold, the closed-end mutual fund neither issues new shares nor redeems existing shares. The mutual fund shares then trade on an exchange, just like a stock. If a shareholder wants to liquidate a closed-end mutual fund, he must make the arrangements through a broker who will find a buyer. The seller may receive more or less than the underlying value (net asset value) of the shares. Conversely, an investor who wants to buy shares of a mutual fund must buy the shares through a broker from someone who holds th
