Manage a Closed Fund

Most of the mutual funds available to investors are known as "open funds." This means that investors can buy and sell shares on a continual basis. Once a fund becomes closed, however, buying and selling are usually not permitted. To get an idea of the big picture, you'll need to gather information about closed funds and learn how you can invest in them.

Understanding Closed End Mutual Funds

Find out what closed end mutual funds are. These mutual funds become closed to new investors once operations begin. In most cases, shares are traded on a public stock exchange.

Learn how closed end mutual funds work. When a closed end fund goes public, investors are permitted to buy into the fund's limited number of shares. Once all shares have been sold, the fund managers invest the profit and the fund moves to a secondary market.

Decide whether this investment fits your personal goals. Closed end funds aren't usually considered high-risk investments, but you may find that the time investment involved doesn't suit your needs. This is especially true if you are on a tight investment timeline.

Talk to your financial adviser. Not only will you learn more about closed end funds, but you'll also get valuable insight into why they may be the perfect complement to your portfolio.

Buy and Manage Closed End Mutual Funds

Browse through upcoming funds to find one you're interested in. You can find a great deal of mutual funds online at most major financial Web sites, like Forbes and Money (see resources). Newspapers also publish information about mutual funds in their finance section.

Find out when shares in the fund you want will be available for purchase. Your best option is to look in the fund prospectus or call the managers for more information.

Discover your buying options. You may be able to buy shares directly from the company. Alternatively, you can also invest through a broker or a fund supermarket.

Work with your financial adviser to manage your portfolio. Closed end funds usually take little or no management. Under certain circumstances, however, you may need to make buying and selling decisions.

Tips & Warnings

• Find out if it is possible to purchase additional shares in your closed fund. Some fund managers occasionally permit existing shareholders to purchase outstanding shares.
• Keep in mind that closed end funds are not without risk. Always analyze every fund before you invest your money, and consult with your financial adviser in depth to determine whether this style of investing is right for you.
• Most investors consider closed end funds to be highly complicated. Therefore, they are not recommended for beginning investors.

by ehow.com