The stock market is much like exclusive guest list party or a first-come-first-served invitation with its mutual funds. Not all mutual funds are available for the taking. They come in two kinds: open and closed end. Open end mutual funds sell an unlimited amount of shares to shareholders. Closed end mutual funds sell an undetermined, fixed amount of shares. Usually, they are traded in the NASDAQ.

Closed end mutual funds vary with different investment goals, portfolios, and strategies used. For starters, they don’t act like the average mutual fund (almost always open ended.) Closed end mutual funds are usually companies that buy stocks of other companies rather than make their own products. They have a designated stock against an exchange and holds values.

Despite all this, closed end funds have more disadvantages than advantages in comparison to open ended funds. Although they are usually discounted below their net values, trading fees are usually higher and closed end funds are riskier. In addition, they hold less liquidity which means it would be harder to withdraw cash when it is performing badly. Plus, the industry has claimed that open ended funds do a better job of convincing new investors to join their ranks, which leads to better management. In essence, closed end funds are hyped for their lower prices. With its poor liquidity and brokers fees, closed end funds take a back seat to open ended ones.