From a structural perspective, mutual funds can typically be broken down into two types.
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.
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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.
Popular Fund Types
InvestingAlthough less popular than their open-ended counterparts, these investment vehicles are worth a second look.
InvestingOpen-end products may be a safer choice than closed-end, but closed-end funds might produce a better return.
InvestingIf you're looking to generate income for your investments, look no further.
InvestingA closed-end fund is a mutual fund that has an initial offering (IPO) of shares, and once those shares are sold, no additional shares are issued. Since it is a public offering, closed-end funds ...
InvestingMuch like an individual’s wardrobe, many portfolios are collections of separate items. They combine stocks and bonds and other investments into one product.
InvestingAn open-end fund is a type of mutual fund that does not limit the amount of shares it issues, but issues as many shares as investors are willing to buy.
InvestingOften forgotten, closed-end funds are publicly traded and can be found on the secondary market.
InvestingA rich offering of attractive alternatives have the open-ended mutual fund facing obsolescence.
Financial AdvisorMore than 80 million people, or half of the households in America, invest in mutual funds. No matter what type of investor you are, there is bound to be a mutual fund that fits your style.
Financial AdvisorLearn how mutual funds work, why they are so popular and how younger investors can get started by putting mutual funds in their IRAs or 401(k)s.