Reply #6: One other thing: All ETF's are Closed end, but not all Closed end funds are ETF's! [View All]

[A HERETIC I AM]

"Exchange Traded Funds" are exactly that - traded on an exchange just like a stock. When they are originated, they issue a specific number of shares, just like when a company does an IPO and issues stock. They are then traded on an exchange. No more shares can be issued that would dilute the value of those already issued, but they can do a "split". Their share price is bid up or down based on any number of forces including supply and demand. They are also not "actively managed" meaning the fund manager is not changing the makeup of the portfolio. (They usually reflect an index or a specific investment sleeve or asset type)


Closed End funds and Open End Mutual Funds ARE actively managed. The fund manager is free to buy and sell portfolio positions if he feels they are underperforming or offer potential. When you sell an Open End fund you are actually redeeming them with the Mutual Fund Company. When you sell an ETF or Closed End shares, you are selling them into the market.