Introduction

An open-end fund allows investors to contribute money into a shared, professionally managed portfolio of securities, with the fund creating new shares as needed to match demand. The fund sponsor sells shares directly to investors and redeems them as well. These shares are priced daily based on their net asset value (NAV). Most mutual and exchange-traded funds (ETFs) are open-end.

They are also more common than their counterpart, closed-end funds, and make up the bulk of investments in 401(k) plans.

Investment Company Institute. "Release: Quarterly Retirement Market Data: Fourth Quarter 2024."

Conclusion

Open-end funds are a popular choice for investors seeking diversification and flexibility. They allow for unlimited shares and are priced in relation to the NAV.

The NAV is calculated only at the close of trading each day for open-end mutual funds. While they offer significant advantages such as liquidity and a wide range of investment options, potential drawbacks include management fees and the impact of redemptions on the fund's performance.