Open-End vs Closed-End Funds

Understanding the difference between open-ended and closed-end funds is an important part of the mutual fund investment process. Before you get involved in mutual fund you need to know which category your fund falls in to. Here are the basics of both types of funds.

Open-End vs. Closed-End 

The difference between open-end and closed-end fund is the amount of investors that are allowed into the fund. An open-end fund does not have any limit on the amount of investors that can get involved. In contrast, the closed-end fund has a set amount of investors that will be allowed in from the very beginning. Therefore, once the number of investors has been reached, they close the doors to any new investors.

Significance

While it might not seem like a big difference, the closed-end fund can have some advantages. It is possible for a mutual fund to get too big for its own good. When a mutual fund is too large, it cannot move under the radar anymore. Outside investors are watching its movements and know when something is about to happen. This can affect the price of the securities that are about to be bought and decrease efficiency. Before long, the mutual fund is not growing at the rate that it once was,



Open End Mortgage



An open end mortgage is a type of mortgage that actually allows a borrower to borrow more money at some point in the future. This type of loan is essentially still open with the lender, and the lender leaves open the possibility of increasing the loan amount at some date in the future. In most cases, the lender will put a specific amount of money that can be lent in the future. The total amount will generally be based on a maximum percentage of the value of the property. The borrower may have to pay additional fees in order to access the money.

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