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Mutual Funds

Closed-Ended Mutual Funds

What is a “closed-ended mutual fund”?

A closed-ended mutual fund is similar to an open-ended mutual fund. Both sell shares to investors and use the proceeds to buy securities or investment vehicles, depending on the investment goal of the portfolio. But the main difference between an open-ended and closed-ended fund is that an open-ended fund can sell an unlimited number of shares in the fund, depending on variables such as investor demand, investment performance, and the size of the fund that the fund manager desires, etc. The share price of an open-ended fund, or its net asset value, can be derived by dividing the market value of the portfolio by the number of shares outstanding and held by investors at the end of each trading day, when managers can assess the value of the holdings of the portfolio and the amount of purchases and redemptions of the fund on any given day. Closed-ended funds (a set or fixed number of shares) issue in an initial public offering, and invest the proceeds into investment vehicles, given the fund’s objective.



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