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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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