| Mutual Funds | | | | redeemed or issued readily at their net asset |
| Mutual funds are financial intermediaries that | | | | value. Therefore, the unit capital of an open-ended |
| collect funds from individual investors and invest | | | | fund keeps varying over time. The term "mutual |
| these funds in various kinds of securities and/or | | | | funds" refers to open-end mutual funds only. |
| other assets. Investing in mutual funds provides | | | | In contrast, by investing in closed-end mutual |
| the benefits of large-scale investing to the small | | | | funds, the investors do not get to redeem their |
| investor. By investing in an investment company, | | | | shares all the time. They can get it done only on |
| the investor contributes to the pool of assets | | | | maturity. New shares too wont be issued. The |
| created by the investment company. The | | | | investors can, however, cash out by selling their |
| investor's claim in the portfolio established by the | | | | shares to other investors. Shares of closed-end |
| investment company is proportional to the | | | | funds are traded on organized exchanges and can |
| amount invested. | | | | be purchased through brokers. Their prices can |
| | | | differ from their net asset value. Hence the |
| Open-end and Closed-end Mutual Funds | | | | closed-end funds are less popular when compared |
| By investing in open-ended mutual funds, the | | | | to open-ended funds. Therefore, investing in |
| investors have an option to "cash out" their | | | | open-ended funds is better than investing in |
| shares at the net asset value at any time. They | | | | closed-ended funds. |
| can also buy new shares. Open-end funds can be | | | | |