Open-End Fund

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 closed-end fund. Closed-end 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.