There are two kinds of funds: open-end funds and closed-end funds. Closed-end funds generally have a closed period, which is more suitable for buying idle money that has not been used for a long time. What are the main differences between closed-end funds and open-end funds? So today, Bian Xiao is here to sort it out for everyone. Let's take a look!
Main differences between closed-end funds and open-end funds
Share issuance and redemption: There are restrictions on the share issuance and redemption of closed-end funds. Under normal circumstances, new shares are only issued during the raising period, and investors cannot buy or redeem shares outside the raising period. Open-end funds can issue and redeem shares at any time, and investors can buy and sell shares at any time according to their own needs.
Market transaction: after the end of the raising period, closed-end funds are not easy to trade and have no liquidity, so investors need to wait for the fund to expire or buy and sell stocks through the secondary market. Open-end funds can be priced and redeemed daily according to the requirements of investors, which has high market transaction and liquidity.
Fund size: The size of closed-end funds is relatively small, because new shares can only be issued during the raising period. Open-end funds are relatively large, and their shares can be increased or decreased at any time according to market demand.
Implementation strategy: Closed-end funds usually focus on specific investment strategies and objectives, such as real estate funds and infrastructure funds. Open-end funds are more extensive, including stock funds, bond funds and money market funds.
What are the risks of closed-end funds?
Liquidity risk: the shares of closed-end funds are not easy to trade, which may cause investors to be unable to cash out quickly or at a low price when they need to redeem the funds.
Investment risk: the portfolio of closed-end funds may face market risks. If the investment strategy and assets held by the fund are not good, the net value of the fund may decline.
Market premium/discount risk: the share price of closed-end funds may be premium or discount in the secondary market, and investors may face additional transaction costs when redeeming.
When choosing a closed-end fund, investors should seriously consider the characteristics, risks and investment objectives of the fund to ensure adequate risk tolerance and investment duration. In addition, investors are advised to read the fund contract and prospectus carefully to understand the fund operation rules and risk disclosure information.
Can closed-end funds be redeemed in advance?
Closed-end funds cannot be redeemed in advance. Generally, closed-end funds have a time limit. For example, the fund details will indicate that the closure period is half a year, one year, three years, two years and so on. Only when it expires can they be withdrawn. However, it should be noted that some closed-end funds will be listed and traded, so they can be sold in the secondary market.
Closed-end funds generally do not have a redemption page when they expire, that is, there is no way to redeem them. Therefore, when buying closed-end funds, it is necessary to plan the funds well, and it is best to keep the unused funds for as long as possible.
If you need this money in the short term, then you can consider open-end funds, that is, funds with no term. It usually arrives in a few days, and can be redeemed a few days in advance when necessary.
Is a closed three-year fund worth buying?
Whether a closed-end three-year fund is worth buying depends on the situation. First of all, three years is a long time. Everyone should make a good capital plan before buying. It is better to buy money that will not be used for three years, or prepare a reserve fund before buying, so that even in case of emergency, there is a reserve fund to use.
In addition, it should be noted that funds are managed by fund managers, so when choosing, you must choose a good fund manager, and you can give priority to fund managers who have worked for a long time. It is better to have more than three years of experience, because it is more experienced than the new fund manager, and the other is to look at the business return rate and the performance of managing the fund.
Then the investment direction should also be analyzed, because the rise and fall of the fund mainly depends on the direction of the fund investment target. Only when the investment direction is promising will there be the possibility of rising. If the investment direction has no development prospects, it is generally not worth buying, because the fund may fall.
When buying a closed-end three-year fund, you should think carefully, because the fund has a long term and poor liquidity. Nobody knows what will happen in the future. Even if you see that the fund is falling, if the fund has not expired, you can't redeem it. You can only wait until the fund is listed and traded or opened regularly.
Will closed-end funds be liquidated?
Closed-end funds will be liquidated. Generally speaking, closed-end funds may be liquidated if their duration is not extended after expiration. Of course, it is also possible to change from closed-end funds to open-end funds.
When the closed-end fund is liquidated, the fund company will return the funds to the investors according to the fund shares held by the investors and the net value of the funds after deducting certain expenses. If the closed-end fund is changed from closed-end fund to open-end fund without liquidation after expiration, then investors can purchase or redeem it normally.
Liquidation of closed-end funds after expiration is relatively unfavorable to investors. Because the liquidation of closed-end funds will aggravate the "marginalized" management, that is to say, the fund manager has already seen the future of the fund when he started to take over a fund, so the significance of cautious management and careless management is not great, and the final result is the same anyway. And if the fund manager does not manage carefully, it is a risk for investors.