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5. HOW ARE CLOSED-END FUNDS DIFFERENT FROM OPEN-END FUNDS? WHY MIGHT THE PRICE OF A SHARE...

5. HOW ARE CLOSED-END FUNDS DIFFERENT FROM OPEN-END FUNDS? WHY MIGHT THE PRICE OF A SHARE OF A CLOSED-END FUND DIFFER FROM ITS NET ASSET VALUE?

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Answer #1

Close ended Mutual funds differ from open ended mutual funds as the number of securities issued is same in closed ended fund always while in open ended fund on each sale and purchase, it keeps on changing.

Closed-ended funds are always actively managed while open ended fund can be actively managed or passively managed.

open ended fund offers high degree of flexibility and liquidity while in close ended fund there is not such flexibility and liquidity as,one cannot sell shares and when he wants.

Net asset value of closed ended fund differs from the actual market price because it is a trading at a discount or a premium as they are not frequently traded so their values are adjusted at the end of the day and that shows they are not updated according to the price fluctuations in the share market so, their Net asset Value are either trading at a discount of premium to the market price

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