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Finance Dictionary and Glossary of Investment Terms
Used in the context of general equities. Mutual fund that continually creates new shares on demand. Mutual fund shareholders buy the funds at net asset value and may redeem them at any time at the prevailing market prices. Antithesis of closed-end fund.
A fund operated by an investment company which raises money from shareholders and invests in a group of assets, in accordance with a stated set of objectives. Open-end funds raise money by selling of the fund to the public, much like any other type of company which can sell stock in itself to the public. Mutual funds then take the money they receive from the sale of their shares (along with any money made from previous investments) and use it to purchase various investment vehicles, such as , and money market instruments. In return for the money they give to the fund when purchasing shares, receive an position in the fund and, in effect, in each of its securities. For most open-end funds, shareholders are free to sell their shares at any time, although the price of a share in an open-end fund will fluctuate daily, depending upon the performance of the securities held by the fund. Benefits of open-end funds include diversification and professional money management. Open-end funds offer choice, liquidity, and convenience, but charge and often require a minimum investment. also called mutual fund.
A fund that is open to new investors where both new investors and existing shareholders may purchase as many shares as they want. Most mutual funds are open-ended. The fund grows as more money comes in. When investors sell, the number of outstanding shares drops.Occasionally, open-end funds are closed to new investors when they become too large and difficult to manage. However, current shareholders in the fund can continue to invest money. Conversely, a closed-end fund raises money only once, offers a fixed number of shares, and these shares are traded on exchanges much like stocks.