Closed-end funds provide exchange-traded flexibility, income potential, ability to tap into specialized asset classes, and lower investment minimums.
How does a closed-end fund differ from an open-end fund?Open-end funds, such as mutual funds or ETFs, take in money from new investors, issue additional shares and buy back shares when investors are looking to sell. In contrast, closed-end funds offer a particular number of shares after raising a fixed amount of money through an IPO.
Are there any risks associated with investing in closed-end funds?Closed-end funds are much less common than open-end funds, and they have some other features and risks not usually found in open-end funds: Because closed-end funds are often actively managed by an investment manager who is trying to beat the market, they may charge higher fees, making them less attractive to investors.
