What is the difference between an open-end mutual fund and a closed-end investment company?
A. What makes an open-end mutual fund different from a closed-end fund is that an open-end mutual fund is continually issuing new shares. When an investor invests in an open-end mutual fund, shares are issued to the investor. When investors choose to sell their shares of an open-end fund, their shares are redeemed (i.e., “bought back”) by the fund; they are not sold or traded on an exchange. Redemptions are at the fund’s current NAV, which may result in a gain or loss. Closed-end funds, however, issue a limited number of shares and subsequently they are bought and sold (“traded”) on an exchange.
