Closed-End Investment Companies
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This article is from the What Every Investor Should Know.
Closed-End Investment Companies
Unlike a mutual fund, a closed-end investment company does not continuously offer to buy back its shares at the option of its shareholders. In addition, a closed-end company usually does not continuously offer to sell its shares. After an initial sale by the company, the shares are traded in the secondary market like the shares of any other public corporation. The price per share may fluctuate in response to changes in the value of a company's portfolio as well as the supply of and demand for its shares. There are also risks associated with the purchase of closed-end fund shares in an initial public offering because such shares frequently trade at a discount from their net asset value. When shares of closed-end companies are traded through the services of a broker, it is customary for a commission to be charged.
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