There are two basic types of mutual funds:
· Open-End Funds
· Closed-End Funds
Open-end mutual funds are investment funds that purchase a group of securities and then sell shares in the fund. They are called open-end funds, since there is no limit on the number of shares allowed to be issued. Open-end mutual fund shares trade at their Net Asset Value (NAV). The net asset value per share represents the fund’s market price, subject to a possible sales or redemption charge. This is the value securities held by the fund, minus any fees charged by the fund, divided by the number of shares in the fund. For example, if the total value of all the securities held in the fund was $1 million, fees were $50,000, and there were 10,000 shares outstanding. NAV would be ninety-five dollars. MutualFundAlliance.com updates this data on a daily basis, usually by 6pm on the day of market close.
Closed-end funds are similar to open-end funds, but like a corporation they have issued a fixed number of shares issued. Also like a corporation, closed-end funds trade on a stock exchange at whatever price the market sets. For a closed-end fund, the market price may vary significantly from the net asset value.