What is a closed ended fund?
A closed-end fund is organized as a publicly traded investment company by the Securities and Exchange Commission (SEC). Like a mutual fund, a closed-end fund is a pooled investment fund with a manager overseeing the portfolio; it raises a fixed amount of capital through an initial public offering (IPO).
Open-end fund (or open-ended fund) is a collective investment scheme that can issue and redeem shares at any time. The term contrasts with a closed-end fund, which typically issues at the outset all the shares that it will issue, with such shares usually thereafter being tradable among investors.
- An open-ended fund or scheme is one that is available for subscription and repurchase on a continuous basis. These schemes do not have a fixed maturity period. Investors can conveniently buy and sell units at Net Asset Value (NAV) related prices which are declared on a daily basis.
- Definition: Mutual funds companies collect an amount from investors when they join or leave a scheme. This fee charged is generally referred to as a 'load'. Exit load is a fee or an amount charged from an investor for exiting or leaving a scheme or the company as an investor.
- A unit investment trust (UIT) is an investment company that offers a fixed portfolio, generally of stocks and bonds, as redeemable units to investors for a specific period of time. It is designed to provide capital appreciation and/or dividend income.
After its IPO, the CEF's shares trade on an exchange; just like a stock, the price of the fund's shares is determined by supply and demand. An open-end (mutual) fund also invests in stocks and/or bonds, depending on its investment objectives, but unlike a CEF, investors purchase shares directly from the fund itself.
- Under the federal tax code, you make an early withdrawal if you sell your shares and access funds before age 59 1/2. In these instances, you typically pay a 10 percent penalty. The penalty rises to 25 percent if you cash in shares in a SIMPLE IRA plan that you have held for less than two years.
- The minimum initial investment for Vanguard Target Retirement Funds and Vanguard STAR Fund is $1,000. A $3,000 minimum applies to most other Vanguard mutual funds. For ETFs (exchange-traded funds), the minimum initial investment is the price of 1 share. Details are provided in each fund's profile.
- You may withdraw your contributions to a Roth IRA penalty-free at any time for any reason, but you'll be penalized for withdrawing any investment earnings before age 59 ½, unless it's for a qualifying reason.
Obtaining closed-end credit is an effective way to establish a good credit rating and demonstrates that the borrower is creditworthy. Generally, real estate and auto loans are closed-end credit, but home-equity lines of credit and credit cards are revolving lines of credit or open-end.
- Open-end credit is a preapproved loan between a financial institution and borrower that may be used repeatedly up to a certain limit and can subsequently be paid back prior to payments coming due. The preapproved amount will be set out in the agreement between the lender and the borrower.
- Obtaining closed-end credit is an effective way to establish a good credit rating and demonstrates that the borrower is creditworthy. Generally, real estate and auto loans are closed-end credit, but home-equity lines of credit and credit cards are revolving lines of credit or open-end.
- The five C's of credit is a system used by lenders to gauge the creditworthiness of potential borrowers. The system weighs five characteristics of the borrower and conditions of the loan, attempting to estimate the chance of default. The five C's of credit are character, capacity, capital, collateral and conditions.
Updated: 2nd October 2019