Definition

Noun: A mutual fund; a type of regulated investment company that pools money from many investors to purchase a portfolio of securities. It is "open-end" because it continuously creates new shares to meet investor demand and stands ready to redeem (buy back) its existing shares from investors at their current net asset value (NAV).

Usage

This term is used in finance and investing to describe a specific, common structure for mutual funds. * An open-end investment company issues and redeems its shares directly with shareholders based on the fund's current net asset value. * Unlike a closed-end fund, the number of shares in an open-end investment company is not fixed.

Examples

• "I decided to put my savings into an open-end investment company to gain diversified exposure to the stock market."
• "The primary advantage of an open-end investment company is its liquidity, as investors can redeem their shares on any business day."
• "Most index funds are structured as an open-end investment company."

Advanced Usage

• Net Asset Value (NAV): The price per share of an open-end investment company, calculated daily by dividing the total value of the fund's assets by the number of shares outstanding. Investors buy and sell shares at this price.
• Contrast with 'Closed-End Investment Company': A closed-end fund issues a fixed number of shares through an initial public offering (IPO), after which its shares trade on a stock exchange like a stock, often at a price that can differ from its NAV.

Variants and Related Words

• Mutual Fund: The common, synonymous term for an open-end investment company.
• Open-End Fund: A shortened, informal version of the term.
• Regulated Investment Company (RIC): The legal category under U.S. tax law that includes open-end investment companies, allowing them to pass capital gains and income directly to shareholders to avoid double taxation.

Synonyms

• Mutual fund
• Open-end fund

Related Phrases

• To redeem shares: The process where an investor sells shares of an open-end investment company back to the fund itself in exchange for the current NAV per share.
• Daily liquidity: A key feature of an open-end investment company, referring to the ability to buy or sell shares on any business day at the NAV.

Noun

1. a regulated investment company with a pool of assets that regularly sells and redeems its shares