Close end funds
Monday, June 29th, 2009There is another type of mutual fund, known as a closed-end fund. This is where from the very beginning the number of shares that can be sold to the public is decided ahead of time; once the shares are sold, the fund is closed to new business. It won’t issue new shares, the way the open-end funds will. New people can buy into a closed-end fund only if someone who owns it wants to sell it. Essentially it’s priced and traded just like a stock—so the value of its shares may not correspond exactly to the value of its holdings.
For our purposes here, though, we’re dealing with open-end funds. These are the ones you usually hear people talking about, and these are the ones commonly offered in 401(k) and 403(b) retirement plans.