How Do Closed-End Investment Companies Differ from Open-End Mutual Funds

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The Answer is Open-end funds create new fund shares when investors buy more fund shares; the fund also redeems the shares upon demand,so liquidity is provided by the fund. The number of fund shares fluctuates daily,but fund shares trade at the net asset value. Closed-end funds trade over the counter or on an exchange. The fund has a fixed supply of shares outstanding,and an investor wishing to purchase shares must find someone willing to sell their shares. Imbalances in supply and demand of the shares of the closed-end fund can cause the shares to trade at prices different from the fund's net asset value. Discounts from net asset value are common. Because a closed-end fund does not have to redeem shares from investors,it does not have to hold as large cash reserves as an open-end mutual fund.

How Do Closed-End Investment Companies Differ from Open-End Mutual Funds

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