What is the difference between an open-end and a closed-end mutual fund?

The main difference between an open-end and a closed-end mutual fund lies in their structure and how they are bought and sold.

1. Structure:
- Open-end mutual funds: These funds are structured in a way that allows investors to buy or sell shares directly from the fund at the net asset value (NAV) per share. The number of shares in an open-end fund is not fixed and can fluctuate based on investor demand. The fund continuously issues new shares to meet investor demand and redeems shares when investors sell them back to the fund.
- Closed-end mutual funds: These funds have a fixed number of shares that are issued through an initial public offering (IPO). After the IPO, the shares are traded on stock exchanges like regular stocks. The fund does not issue new shares or redeem existing shares based on investor demand.

2. Buying and Selling:
- Open-end mutual funds: Investors can buy or sell shares of an open-end fund at any time at the current NAV per share. The transactions are typically done through the fund company or an authorized intermediary, such as a broker or financial advisor. The price at which shares are bought or sold is determined by the NAV at the end of the trading day.
- Closed-end mutual funds: Investors can buy or sell shares of a closed-end fund on a stock exchange, similar to buying or selling stocks. The price at which shares are bought or sold is determined by supply and demand in the market and may differ from the fund's NAV. Investors may also incur brokerage fees or commissions when buying or selling closed-end fund shares.

3. Pricing:
- Open-end mutual funds: The price at which shares are bought or sold is based on the NAV per share, which is calculated at the end of each trading day. This ensures that investors receive the fair value of the underlying securities in the fund.
- Closed-end mutual funds: The price at which shares are bought or sold is determined by market demand and supply, and it may trade at a premium or discount to the fund's NAV. The market price of closed-end fund shares can be influenced by factors such as investor sentiment, market conditions, and the fund's performance.

In summary, open-end mutual funds allow investors to buy or sell shares directly from the fund at the NAV, while closed-end mutual funds have a fixed number of shares that are traded on stock exchanges. Open-end funds are bought and sold at the NAV, while closed-end funds are bought and sold at market prices that may differ from the NAV.