Mutual fund cousins.Q What is the difference between an open-end and a closed-end mutual fund? --J. Basey Covington, Kentucky A An open-end mutual fund is the kind most investors are familiar with. A mutual fund complex, also called an investment company, sponsors them. The term "open-end" means the company continually creates new shares of the fund to meet investor demand. Shareholders of open-end mutual funds buy shares at net asset value (NAV See navigation system and navigation bar. ), which is the market value of a fund share. NAV is calculated by taking the closing market value of all securities owned plus all other assets other assets Assets of relatively small value. For financial reporting purposes, firms frequently combine small assets into a single category rather than listing each item separately. such as cash, subtracting all liabilities, then dividing the result--called total net assets--by the total number of shares outstanding. A "closed-end" mutual fund is a type of portfolio that has a fixed number of shares and is listed on a stock exchange. Unlike open-end funds Open-End Fund A mutual fund that continues to sell shares to investors, and will buy back shares when investors wish to sell. Notes: Open-end funds have no limit to the number of shares they can issue. The majority of mutual funds are open end. , closed-ends don't issue and redeem shares on a continuous basis. New closed-end funds Closed-end fund An investment company that issues shares like any other corporation and usually does not redeem its shares. A publicly traded fund sold on stock exchanges or over the counter that may trade above or below its net asset value. Related: Open-end fund. are brought to the market in an initial public offering. Both open-end and closed-end funds are run by portfolio managers and invest in stocks, bonds or other securities. However, closed-end funds tend to be more specialized. For example, there are several single-country funds Single-Country Fund A mutual fund that restricts its investment to the assets of one country and is able to allocate its funds only within the range of investment instruments available in the specified country. This restriction is based on the mutual fund prospectus. that invest in the securities of just one nation. In addition, some closed-end bond funds carry a great deal of leverage in their portfolios, meaning they're riskier than similar open-end bond funds. Closed-end funds are priced at a discount to their NAV because managers of such portfolios are perceived as less responsive to profit opportunities. However, open-end managers have shareholders to please. You can find out more information on both types of funds, including top five holdings and returns, at www.morningstar.com. Mail your finance questions to Ask B.E., BLACK ENTERPRISE, 130 Fifth Ave., New York New York, state, United States New York, Middle Atlantic state of the United States. It is bordered by Vermont, Massachusetts, Connecticut, and the Atlantic Ocean (E), New Jersey and Pennsylvania (S), Lakes Erie and Ontario and the Canadian province of , NY 10011, or send an e-mail to cintroni@blackenterprise.com. |
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