The Difference Between Open-end & Closed End Funds

An open-end fund is a mutual fund that continues to sell shares to investors on an on-going basis, and will buy back shares when investors decide to sell their shares. When an investor wants to buy shares of an open-end fund, their broker buys the shares directly from the fund. For example, if you want to buy $50,000 of the Van Kampen fund, the shares would be purchased directly from Van Kampen. When you want to sell these shares, you sell them back (redeem them) to Van Kampen.

A closed-end fund is a mutual fund that issues a fixed number of shares in a portfolio of securities. The shares in a closed-end fun are traded in the market, or on exchanges, just like common stock is. So, the prices of these funds are determine by supply and demand exactly the same way that prices of investment vehicles such as stock are. For example, if you want to buy $30,000 of the Nasdaq Aggressive Fund, you would purchase the shares through an exchange such as the Nasdaq. When you want to sell these shares of this fund, the shares would be sold on the Nasdaq, not redeemed to the issuer.