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The Definition Of An Open Ended Mutual Fund

March 12, 2012 | Comments: 0 | Views: 175

The most typical kind fund offered by investment providers is an open ended mutual fund. What makes an open ended fund open is the fact that the amount of investors, shares, and fund size in general is limitless. However, the manager can decide to close the fund to new investors in order to keep manageability under control. The share price, or value of a fund is called its Net Asset Value (NAV), and is calculated at the end of every market day. The alternative to this kind of fund is a closed ended one. An open ended fund is ideal for a long term investment. The diversity it provides for one's portfolio enables the dangers of investing to be lowered, making for the perfect opportunity to watch your gains increase over time.

The Benefit Of An Open Ended Fund

There are many factors that contribute to this type of fund's popularity. They are great retirement investments, and can be easily used by novice investors at a low cost. They include diverse portfolios, something that helps both beginning and veteran investors. Open ended mutual funds buy shares from a multitude of companies, insuring that your fund will be more likely to stay afloat should the market take a sudden dive. As time goes by, the more money that investors put into a fund will increase the amount of shares the fund has. In the case of a closed fund, only a certain amount of shares will be available, and they will be traded much in the way that stocks are. Its NAV is susceptible to much more change than that of an open ended fund.

Other Open Ended Fund Information

The stock symbol for an open ended mutual fund is five letters, whereas close ended funds have three or four. The NASDAQ uses four letter symbols, while the NYSE and AMEX use three. The only time the share price for open ended funds is updated is at the end of a market day. The price of closed funds rise and fall all throughout the day, and shares are traded during the entire market day. One of the benefits of an open mutual fund is that investors can zero in on certain industries, such as technology, medicine, and finance. Because the fund will provide instant diversification within its portfolio, there's no need for investors to become experts in their selected industry before beginning to invest. You can buy shares via the Internet, through the mail, with a broker, over the phone, or go straight to the fund yourself.

Connor Swinney is the owner of the What Are Mutual Funds website. He created the website to be used as a resource for people who are looking for more information on Properly Evaluating Mutual Funds or that would like to know how they can create a successful investment strategy.

Source: EzineArticles
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