What is an open-end mutual fund? What is a closed-end mutual fund? What is an exchange-traded fund (ETF)? Why did the cactus cross the road? (It was stuck to the chicken.) Anyway, each of these types of mutual funds have different characteristics and different fees.
An open-end mutual fund trades at its Net Asset Value (NAV) net of its expenses (management fees, etc). The fund is constantly issuing and redeeming shares (open ended). At the end of each trading day the NAV for the day is calculated and all shares purchased during the day are bought and sold at that price. (So you normally don’t know till the next day what you paid for the fund).
A closed-end fund issues a set number of shares when it is set up at a set price (like an initial public offering (IPO) of a stock). Normally no more shares are issued; the shares then trade on the open market like a stock. You can buy them during the normal trading day like a stock. These shares can trade at a discount (below) or a premium (above) to their NAV. Usually investors want to buy shares at a discount to the NAV because they feel they can make more money as the fund shares rise back up to full value (sometimes yes, sometimes no – I have seen shares trade at a discount to NAV for years.)
An Exchange Traded Fund (ETF) shares traits of both open and closed funds. They trade through-out the day like closed-end funds but stay close to NAV like open-end funds. They are almost always index funds (they buy securities in a particular index (S & P 500, Wilshire 5000, various bond indexes, etc.)). Because of the way they are set up and the fact that they buy securities in huge blocks, ETFs usually have lower expenses than other mutual funds.
Knowing the differences might influence whether you want to buy an open or closed fund (or an ETF). If you are not sure, you can check with the financial planners in the resource section of my website:
https://briantstonercpa.com/Resources.html
They can help you decide which fund is best for your investment.