What is the difference between closed-end and open-end funds? Which is better?
Open-end funds and closed-end funds are both mutual funds. Open-end funds issue more shares when shares are purchased. When shares are cashed in or sold, open-end funds redeem these shares and then cancel them. Closed-end funds have initial offerings of a limited number of shares. It's very similar to a stock issue; there are a limited number of shares. The price is determined solely by the market. The price of closed-end funds can be more or less than the net asset value.
Which is better? It depends upon your objectives. Usually a closed-end fund invests in a specific sector (such as country funds). With open-end mutual funds, you can transfer from one fund to another within a family of funds without incurring a sales charge.
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