What Is a Open End Mutual Fund?
If demand is high enough, the fund will continue to issue shares no matter how many investors there are.
Open-end funds also buy back shares when investors wish to sell.
It should be noted that when a fund's investment manager(s) determine that a fund's total assets have become too large to effectively execute its stated objective, the fund will be closed to new investors and in extreme cases, and will be closed to new investment by existing fund investors.
An open-end mutual fund takes investor money and pools it with other investors' money to buy shares in companies defined by the investment objective of the fund through a prospectus.
There is no limit to the number of shares an open-end mutual fund can or will issue.
If investors continue to send money, the fund will continue to issue shares and buy stock in the underlying companies or other objective-consistent securities.
Why Funds Close
An open-end mutual fund's value is determined by the value of the underlying securities.
In cases where the share volume is determined to be excessive and unmanageable, the fund can be closed with a new one then opened to investors, the funds can remain in the closed fund, and it becomes a close-end fund as defined.
Time Frame
Fees
It cost money to manage a mutual fund. The money that a fund earns can be interpreted in two ways, gross return and net return.
Net return is the amount the fund has earned, less any fees associated with managing the fund: management costs and administrative fees.
Open end-funds have these fees associated with the fund as an integral component of doing business.
Open-end funds should not be confused with no-load funds that don't have a sales charge at the purchase or sale of the fund.
