What is a "closed-end" mutual fund?

What is a "closed-end" mutual fund?

When most people are talking about mutual funds, what they're really talking about is an open end fund. There's another type of fund that's a closed end fund, and really the difference between the two is how their shares are handled relative to the mutual fund and the underlying investor. With an open end fund, if you want to buy shares you send in the money to the mutual fund. They actually create more shares and send you shares back of that mutual fund. When you want to sell, you send your shares to the mutual fund company and they send you back money. A closed end fund is actually closed, meaning that the shares have already been established that exist in the marketplace. So if you want to buy shares of a closed end fund, you actually don't go buy the shares from the mutual fund itself. They trade on the stock market, where you'd actually want to go buy those shares from another person who owns the shares and is trying to sell them. So there becomes that secondary market with the closed end fund. Fundamentally, what they do is really the same thing but the difference between open and closed is how their shares are open and sold.