Mutual Funds

Closed-Ended Mutual Funds

What are some other differences between closed-ended funds and ETFs?

Many experts believe closed-ended funds are more prone to change their original investment objective in order to pursue better returns. ETFs really cannot do this, since they usually invest in market indexes. This means that ETFs tend to be more transparent to the investor in terms of what is in their portfolios than are closed-ended funds that may change the mix of their investments at any time. Closed-ended funds may also use leverage to try to enhance the performance of their portfolios, whereas ETFs generally do not use leverage to enhance their portfolios. Closed-ended funds tend to have more activity in trades related to buying and selling its underlying shares, generating more taxable events than ETFs.


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