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Open-ended funds, also known as mutual or bond funds, allow investors to buy shares directly from the fund manager with no limit on the number of shares sold. The fund manager buys back shares from investors who want to sell. The share price is called the net asset value (NAV) and is determined once a day. Some funds have up-front sales fees, while others do not. Investors can learn about the fund’s objective and investment strategy from the fund manager’s prospectus. Open funds may be closed to limit the amount of money held in the fund.
In the United States, open ended funds, also called open ended funds, refer to mutual funds or bond funds. Investors can buy shares in open-ended funds directly from the fund manager. There is no limit to the number of shares in the fund that can be sold. Open ended fund managers also buy back shares from investors who want to sell. This is different from closed-end funds, which have a set number of shares sold through the stock markets.
Open-ended fund investment returns are tied to the stock and bond markets. Open-ended fund managers pool the fund’s money into an open-ended fund to buy individual stocks and bonds. Fund shareholders obtain diversified investments simply by purchasing shares of the fund. Shareholders pay for this investment experience through management fees charged by the fund manager.
The share price of open-end funds is called the net asset value (NAV). In general, the NAV is determined once a day. The NAV is usually calculated after the stock market closes for the day. The fund manager determines the value of the shares and deducts the expenses incurred that day to manage the fund. The result is the NAV.
Some open-ended funds also include up-front sales fees, called loads. The charge covers a commission paid to the seller who arranged the sale with the fund manager. These sellers are called brokers. There are also open-ended mutual funds without these fees, called no-load funds. Shares in the no-load fund are purchased directly through the fund manager, rather than through a broker.
Investors can learn the details of an open fund through a document provided by the fund manager called a prospectus. The brochure includes details on charges and other fees. Investors can also learn about the fund’s objective and investment strategy from the fund manager.
The prospectus also includes details about the open-end fund’s past performance, including any gains or losses. This includes earnings for each year and overall earnings since the fund started. Information on how to buy and sell shares is usually included. Prospective investors should read the prospectus carefully before purchasing shares in an open-ended mutual fund or bond fund.
Open funds are sometimes closed to limit the amount of money held in the fund. When an open-ended fund is closed, new investors cannot buy shares of the fund manager. One advantage of investing in open-ended mutual funds is that even when the fund is closed to new investors, existing investors can usually purchase additional fund shares.
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