A closed-end fund, legally known as a closed-end investment company, is one of three basic types of investment companies The two other types of investment companies are open-end funds (usually mutual funds) and unit investments trusts (UITs). Exchange-traded funds (ETFs) are generally also structured as open-end funds, but can be structured as UITs as well.
A closed-end fund invests the money raised in its initial public offering in stocks, bonds, money market instruments and/or other securities.
Here are some of the traditional and distinguishing characteristics of closed-end funds:
There are many varieties of closed-end funds. Each may have different investment objectives, strategies, and investment portfolios. They also can be subject to different risks, volatility, and fees and expenses. Fees reduce returns on fund investments and are an important factor that investors should consider when buying shares.
You should carefully read all of a fund’s available information, including its prospectus and most recent shareholder report before purchasing fund shares.
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