What are open-ended and closed-ended funds?

Open-ended Funds – A type of mutual fund that does not have a cap on the maximum number of shares it can issue is an open-end fund. While shares are removed from circulation when they are sold, new shares are produced when purchased. Shares are purchased and sold at their net asset value (NAV), which is determined at the conclusion of the trading day based on the value of the fund's underlying securities.

Closed-ended Funds - Closed-ended funds have a fixed unit capital and sell a certain quantity of units. Investors cannot purchase closed-ended fund units once the NFO (New Fund Offer) period has finished, in contrast to open-ended funds. A closed-end fund issues a set number of shares, which are bought as stock by investors in the closed-end fund, in order to raise the required amount of capital through an NFO just once. A closed-end fund's stock price changes in response to market dynamics including supply and demand as well as the shifting prices of the securities the fund owns