To decode the two concepts of closed-end funds and open-end funds Investors can refer to the following article from HVA. From there, they can draw conclusions and choose an investment channel that suits their personal plans.
What is the concept of open-ended fund?
A better understanding of the two concepts closed-end funds and open-end funds via the following information:
Closed-end fund
Closed-end funds are defined as funds issued at a certain time when the fund is established. The certificates are fixed on the exchange and can occur the status of buying, selling and exchanging between investors. Through the securities market, transactions are executed and function properly.
Once the initial offering period ends, investors cannot purchase additional fund certificates directly. In short, investors can only purchase closed-end funds within a pre-determined period.
In addition, closed-end funds also have some special identifying characteristics that investors need to know to avoid confusion with other funds. Specifically, some outstanding characteristics of closed-end funds include:
– Fixed number of certificates: Closed-end funds are only issued in a pre-determined number. When the specified number of certificates are purchased, the trading session will be closed and you will have to wait until the next trading session.
– Trading on the stock exchange: Thanks to the certificates being listed specifically and traded on the stock exchange.
– The price of fund certificates listed on the stock exchange may be higher or lower than the net value of the fund.
– When fund certificates are first issued, investors can only buy fund certificates through other investors in the market.
In addition to some outstanding features, fund certificates also bring investors many outstanding advantages when participating. Thanks to these advantages, many investors choose closed-end funds as suitable investment funds. Some advantages of closed-end funds include:
– High liquidity helps investors buy and sell fund certificates whenever they want on the stock exchange.
– A team of professional management staff helps manage and provide appropriate investment strategies for users. From there, it is easy to allocate assets and create better investment plans.
– Occupy a percentage of transactions at a price higher than NAV, allowing investors to buy fund certificates at a higher net value.
However, in addition to some outstanding advantages when investing in closed-end funds, investors encounter a small disadvantage in price fluctuations. Over time, fund certificates can change depending on supply and demand in the market. In particular, the price does not accurately reflect the value of the fund's net assets.
Seeing that investing in closed-end funds is a relatively safe form of investment. Requiring investors to be able to choose many potential fund certificates for investment and development. From there, the return on investment when investing in closed-end funds increases and is more effective.
Open-end fund
Unlike closed-end funds, open-end funds are a form that helps investors buy and sell fund certificates at any time and directly from the fund. Thanks to that, investors are free to buy and sell fund certificates without worrying about quantity and price. From there, depending on the needs of investors, they can participate in buying quantity and set should invest in open-end funds whichever is appropriate.
To quickly identify an open-end fund, investors need to rely on some identifying characteristics of the fund. Specifically, some identifying characteristics of an open-end fund include:
– Flexible number of certificates for sale: Unlike closed-end funds, the number of certificates is not limited and is always open for sale in many time frames.
– The value of fund certificates is clearly determined based on the net value at the time of transaction.
– In particular, open-end funds are not opened on the stock exchange. Investors buy fund certificates through fund management companies.
Seeing the flexibility of open-end funds for investors when participating in open-end funds. Thanks to that, investors can buy and sell fund certificates more quickly, effectively and stably. In addition, open-end funds also bring investors certain advantages such as:
– Listed buying and selling price based on net asset value
– Easy and flexible investment and profitability
– Investors can invest long-term and short-term depending on personal needs.
However, in addition to possessing parallel advantages, open-end funds still have 2 disadvantages such as: Liquidity is not as high as closed-end funds, management is not flexible. From there, we can see the more or less impact on the investment process and investment needs of buyers and sellers.
Investing in closed or open certificates has certain advantages and disadvantages. Therefore, investors need to research and choose information about investment knowledge suitable for personal investment strategy. From there, grasp the investment plan closely and increase the ability to generate profits.
Difference between closed-end fund and open-end fund
Knowing what a closed-end fund is and what an open-end fund is helps investors see the investment forms in these two channels. However, to understand more clearly, investors need to have Compare closed-end funds and open-end funds see the difference in the two forms of investment. Thanks to that, you can have a more diverse and effective investment plan.
First, in terms of the number of certificates, the two investment channels have clear differences. The closed-end fund fund certificates are fixed, but the open-end fund has flexible number of certificates. In addition, when buying a closed-end fund, investors can buy on the stock exchange, whereas in an open-end fund, investors must buy and sell directly with the management company.
The value of open-end fund certificates depends directly on the net asset value that determines the price. In contrast, closed-end funds are priced flexibly, which can be lower or higher than the net value. Therefore, closed-end funds have higher liquidity than open-end funds at the present time on the market.
However, in terms of investment strategy, both investment channels can invest long-term, thereby making investment flexible. On the contrary, in terms of investment costs in both funds, when investing in closed-end funds, the cost at the exchanges is lower than the cost of open-end funds. Through that, we can see the difference. difference between closed-end fund and open-end fund.
Choosing the right investment channel depends a lot on the purpose and plan of the investors. In addition to the time factor, choosing the right investment channel is very important. When choosing the right investment channel, investors can easily earn a certain amount of profit when smart investment, have a specific plan.
Conclude
Through information about closed-end funds and open-end funds from HVA Investors understand more clearly about these two forms of investment. It is very important to see how to invest in each channel. For the difference of each investment channel, investors need to have for themselves practical and effective investment strategies. Thanks to that, investors can make transactions quickly and safely.
