Written By: Alexandra Bartsch, Intern
Anyone who has looked at their Quarterly reports in detail may have noticed that each ticker symbol ends with an X, and maybe you’ve wondered why. In contrast to single stocks and closed-end funds, open-end funds (mutual funds) are each signified with an X at the end of their ticker. (DFQTX, DFSVX, etc.) While most investors understand the difference between individual company stocks and mutual funds, many are unaware of the distinction between open-end and closed-end funds.
Open-end funds, commonly known as mutual funds, are funds with an unlimited number of shares. Therefore, each share is issued or redeemed at its net asset value (the fund’s assets minus its liabilities, divided by its number of shares) and all transactions go through the fund manager. Because new investors are constantly buying into the fund and current investors are selling out of the fund, the number of shares of the fund changes daily.
In contrast, closed-end funds have a fixed number of shares and therefore do not issue or redeem new shares. In order to buy into or sell out of a closed-end fund, an investor must buy or sell from another individual investor via an organized exchange. Shares of these funds trade at a market price rather than at the net asset value.
So what does this mean for your investments? Both open-end mutual funds and closed-end funds have their advantages and disadvantages. Your use of either in your portfolio should depend on your specific investment objectives.