What is the difference between open-ended mutual funds and close-ended mutual funds?
A close-ended mutual fund issues only a certain number of shares. After the shares are sold and the money is invested in its portfolio of securities, trading of the fund’s shares can take place. The company is not obligated to redeem its shares or issue more shares. An investor who no longer wants to hold shares in the fund may simply sell them in the market. Thus a close-ended fund is traded on the Exchange or CASE. An open-end mutual fund, by contrast, is constantly offering new shares to the public and redeeming its outstanding shares. There is no limit to the number of shares that can be issued. Open-ended fund shares are bought and sold directly through the fund itself or its agents, not over-the- counter or on an exchange.
