Mutual Funds

What this video covers

• How open-end funds use continuous offerings to create and redeem shares on demand, while closed-end funds issue a fixed number of shares through an initial public offering (IPO) only
• Why open-end funds always trade at net asset value (NAV), calculated once daily after market close using total assets minus total liabilities divided by shares outstanding
• What forward pricing means: all open-end orders execute at the next calculated NAV, never at a prior or stale price
• How closed-end funds trade on exchanges at market prices determined by supply and demand, creating premiums (market price above NAV) or discounts (market price below NAV)
• Why leverage is an exclusive closed-end fund feature that amplifies both gains and losses
• The closed fund decoy: a closed fund is still an open-end fund that temporarily stopped accepting new investors, not a structurally closed-end fund
• Why premium or discount language in any exam question signals closed-end fund, and why forward pricing applies only to open-end funds