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Closed-end mutual funds generally have a fixed number of shares outstanding and are traded on the over-the-counter market or, in some instances, on nigerian stock exchange. These mutual fund shares are purchased and sold at the market price plus a commission. You buy them at the offer price stipulated by the fund manager and sell at the bid price. They may sell at a premium, that is, above the value of their assets, or at a discount, below the value of their assets. Hence unlike the open-ended mutual funds, Closed-end mutual funds (the shares of which are traded by investors) may trade at a higher or lower price than their NAV (Net Asset Value).

Exchange-traded Mutual funds

ETFs combine characteristics of both traditional mutual funds and closed-end mutual funds. An Exchange Traded Funds usually tracks a stock index. Shares are issued or redeemed by institutional investors in large blocks. Investors typically purchase shares in small quantities through brokers at a small premium or discount to the net asset value; this is how the institutional investor makes its profit. Because the institutional investors handle the majority of trades, ETFs are more efficient than traditional mutual funds (which are continuously issuing new securities and redeeming old ones, keeping detailed records of such issuance and redemption transactions, and, to effect such transactions, continually buying and selling securities and maintaining liquidity position) and therefore tend to have lower expenses. Llike closed-end mutual funds, ETFs are traded throughout the day on a stock exchange.

Exchange traded funds are also valuable for foreign investors who are often able to buy and sell securities traded on a stock market, but who, for regulatory reasons, are unable to participate in traditional US mutual funds.