Open-End Fund Vs Closed-End Fund

Both open-end and closed-end funds comprise a portfolio of securities (such as bonds and stocks) that is managed by a professional investment manager. Closed-end funds are regulated by the Securities and Exchange Commission (SEC), and are typically traded on major stock exchanges like New York Stock Exchange, Toronto Stock Exchange, and NASDAQ. They can be bought and sold throughout the trading day.

Closed-ended funds can be fairly volatile and are more appropriate for seasoned investors. Their prices are determined by the market force which is supply and demand. On the contrary, the open-end mutual fund shares are priced at their net asset values (NAV), which are computed on a daily basis by dividing the total net value of the securities by the number of shares outstanding.

Open-end funds (or open mutual funds) are much more common than closed-ended funds and can be freely sold and repurchased by investors. An open-end fund continually issues new shares to investors and redeems shares when investors withdraw money, but it does not trade on an exchange.

* Next: Types of Equity Funds
0 comments: