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Mutual Funds - Open-Ended And Closed-End Funds

From a structural perspective, mutual funds can typically be broken down into two types.

Open-Ended Funds
These funds dominate the mutual fund marketplace, in terms of volume and assets under management. With open-ended funds, purchases and sales of fund shares take place directly between investors and the fund company. There's no limit to the number of shares the fund can issue; as more investors buy into the fund, more shares are issued. Federal regulations require a daily valuation process, called marking to market, which subsequently adjusts the fund's per-share price to reflect changes in portfolio (asset) value. The value of the individual's shares is not affected by the number of shares outstanding.

Related Readings

Closed-End Funds (CEF)
These funds issue only a specific number of shares through an initial public offering and do not issue new shares as investor demand grows. Prices are not determined by the net asset value (NAV) of the fund, but are driven by investor demand. Purchases of shares are often made at a premium or discount to NAV.

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Popular Fund Types


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RELATED TERMS
  1. Closed-End Fund

    A closed-end fund is a publicly traded investment company that ...
  2. Open-End Fund

    A type of mutual fund that does not have restrictions on the ...
  3. Fund Company

    A commonly used term to describe an investment company, which ...
  4. Forward Pricing

    A Securities and Exchange Commission regulation that requires ...
  5. Open-End Management Company

    A company that distributes and redeems securities it issues. ...
  6. Net Asset Value - NAV

    A mutual fund's price per share or exchange-traded fund's (ETF) ...
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  2. What are the primary differences between a closed end investment and an open end ...

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  3. Why is it that when investors realize returns on a mutual fund, its price tends to ...

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  4. What risks are associated with a closed end investment?

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