Closed-End Fund vs Mutual Fund
A fund with a fixed number of shares that trades on an exchange. A pooled fund priced once daily at net asset value.
What is the difference between Closed-End Fund and Mutual Fund?
Open-end (mutual) funds issue and redeem shares continuously at NAV. Closed-end funds have fixed shares that trade at market prices, above or below NAV.
| Closed-End Fund | Mutual Fund | |
|---|---|---|
| In one line | A fund with a fixed number of shares that trades on an exchange. | A pooled fund priced once daily at net asset value. |
| Example | A closed-end muni fund with a $15 NAV trading at $13.50 - a 10% discount. | An order entered at 11 a.m. fills at the 4 p.m. NAV, not at the price when it was placed. |
| Unit | Equities, Funds & Alternatives | Securities & Instruments |
| Series 65 | Section 2: Investment Vehicles | Section 2: Investment Vehicles |
What is Closed-End Fund?
Raises capital once through an IPO, then shares trade between investors on an exchange at market prices that can sit at a premium or discount to NAV. The fund does not redeem shares. Closed-end funds may use leverage and can hold less liquid assets, since they never face redemptions.
What is Mutual Fund?
A registered investment company that pools investor money into a managed portfolio. Shares are bought and sold directly with the fund at the day's closing NAV - no intraday trading. Funds must distribute realized capital gains to shareholders annually, which can create a tax bill even in a down year.