What is the difference between an open-end mutual fund and a closed-end mutual fund?
A. What makes an open-end mutual fund different from a closed-end mutual fund is that an open-end mutual fund is continually issuing new shares. When an investor invests in an open-end mutual fund, new shares are issued to the investor. When investors choose to sell their shares of an open-end fund, their shares are redeemed by the fund; they are not sold or traded on an exchange. Closed-end funds, however, issue a limited number of shares and in turn they are bought and sold on an exchange. In addition, an open-end fund can decide to “close” a fund to new investors should management feel that the fund is becoming too large.
