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Net Asset Values of Closed-End Mutual Funds

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Net Asset Values of Closed-End Mutual Funds

Most mutual funds are open-ended. This means that they issue and redeem shares continuously. When you want to buy more shares, the funds are obligated to issue new shares. When you want to redeem, the funds must buy back your shares.

Things To Know

  • Closed-end funds calculate their NAVs the same way that open-ended funds do.

How closed-end funds work

A smaller number of funds are closed-end funds. They sell a fixed number of shares to the public. After their initial public offerings are completed, the funds literally close, after which investors can buy and sell shares from one another only, using exchanges or the over-the-counter market.

How they calculate their NAVs

Closed-end funds calculate their NAVs the same way that open-ended funds do. Closed-end funds do not redeem their shares, as do open-end funds. But like open-ended funds, closed-end funds include two prices in the financial press.

The market prices of closed-end fund shares change according to the market demand for them. The price of a share varies the way a share of stock does—according to the decisions made by both buyers and sellers. For example, a fund may have an NAV of 20 but a current market price of 21.50.

The financial pages also quote the prices of closed-end funds alongside their net asset values. Here is an example:

Price Quote of a Closed-End Fund

Although net asset values are not affected by loads and offering prices, they are affected greatly by the market.