Open Ended and Closed Ended Funds

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DIFFERENCES BETWEEN OPEN-ENDED AND CLOSED-ENDED FUND OPEN END FUND DEFINATION A type of mutual fund that does not have restrictions on the amount of shares the fund will issue. If demand is high enough, the fund will continue to issue shares no matter how many investors there are. Open-end funds also buy back shares when investors wish to sell. CLOSED END FUND DEFINATION A type of fund with a fixed number of shares outstanding, and one which does not redeem shares the way a typical mutual fund does. Closed-end funds behave more like stock than open-end funds: closed-end funds issue a fixed number of shares to the public in an initial public offering, after which time shares in the fund are bought and sold on a stock exchange, and they…show more content…
Open ended funds do not have the flexibility to borrow against their assets thus they cannot use leverage as part of their investment strategy. Close end fund on the other hand have flexibility to borrow against their assets allowing them to use leverage as part of their investment strategy. Closed-end mutual funds continuously trade on the open stock market throughout the day. The prices of these funds are continually shifting to meet supply and demand. On the other hand, open-end mutual funds recalculate their share price once per day when the stock market closes and the value of its underlying stock assets are recalculated. Therefore, investors can buy and sell their shares based on the price of the open-ended mutual fund at the close of the previous business day, when the NAV was recalculated. Closed-ended fund shares can be traded at any time during market opening hours. On the other hand open-end fund can usually be traded only at a time of day specified by the managers, and the dealing price will usually not be known in advance. REFERENCES. Russell Ray. An introduction to Mutual Funds worldwide. 2007 Tripathy P. Mutual Funds :

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