What is a closed-end fund?

a closed-end fund refers to a fund in which the total amount of approved fund shares is fixed within the term of the fund contract, and the fund shares can be traded in a legally established securities exchange, but the fund share holders are not allowed to apply for redemption. When establishing the fund, the fund promoters limit the total amount of the fund units. After raising the total amount, the fund is declared to be established and closed, and no new investment will be accepted for a certain period of time. What are the characteristics of closed-end funds?

closed-end funds can be listed and circulated, which makes the transaction price of closed-end funds inconsistent with the net value of fund shares (net assets/total shares) compared with open-end funds.

the net value is the intrinsic value of the fund itself, which mainly reflects the real performance of the fund. The transaction price is also affected by the relationship between market supply and demand. When demand exceeds supply, the transaction price may rise above the net value, which is called premium. When the supply exceeds the demand, the transaction price may fall below the net value, which is a discount.

Therefore, if you invest in closed-end funds, you can hold them for a long time and pursue the return brought by their net value growth. You can also take advantage of the fluctuation of transaction prices in the market, buy at a discount, sell directly when the premium is high, or redeem at the net value after the closure period, all of which can benefit from it.