An open-end fund is a mutual fund that issues new shares when investors
put in money and redeems shares when investors withdraw money. This
contrasts with a closed-end fund, which has a fixed number of shares that
trade over-the-counter or on a stock exchange. The share price of an
open-end fund is determined by dividing the total net assets of the fund by
the number of shares outstanding. This figure is called the fund's net asset
value or NAV. The net asset value of an open-end fund is calculated at the
end of each trading day.
Open-end funds sometimes close their doors to new investors. This can occur
for a variety of reasons. A fund may find its investment style hampered when
assets under management grow too rapidly. Funds that invest primarily in
small capitalization stocks often close for this reason. Typically, existing
shareholders can continue to purchase and redeem shares, but no new
investors may participate in the fund. An open-end fund that is temporarily
closed to new investors is not the same as a
funds issue a limited number of shares in an initial public offering. Shares
of closed-end funds trade over-the-counter or on a stock exchange.
Please note that according to statistics, 70% of mutual funds do not out
perform index funds.
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