What is the difference between open-end fund and closed-end fund? - INVESTFUND.NET

What is the difference between open-end fund and closed-end fund?

3/13/2024

The main difference between open-end funds and closed-end funds lies in how shares of the funds are bought and sold.
Open-end funds, also known as mutual funds, continuously issue new shares to investors and redeem shares when investors want to sell. This means that investors can buy and sell shares of an open-end fund directly from the fund at the net asset value (NAV) of the underlying securities in the fund's portfolio.
Closed-end funds, on the other hand, have a fixed number of shares that are bought and sold on the open market like stocks. This means that shares of closed-end funds are subject to supply and demand forces and can trade at a premium or discount to the NAV of the fund's underlying securities.
Additionally, closed-end funds often have more specialized investment strategies and can invest in less liquid or hard-to-value assets compared to open-end funds, which typically have more diversified portfolios of stocks, bonds, or other securities. Closed-end funds also typically have lower expense ratios compared to open-end funds.

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