These days there are thousands of mutual funds for investors to choose from. Most investors are aware of the close-end mutual funds. A closed-end mutual fund is one that is bought and sold just like the shares of a regular stock. It issues a specific, limited number of shares and the shares in closed-end mutual fund remains fixed.

Close-end mutual fund is traded over-the-counter like stocks. The value of shares is determined by demand and supply in market. An individual investor can’t affect the total size of closed-end mutual fund. If you want to purchase and sell the shares of close-end fund you have to take the help of broker to find sellers and buyers.

In order to get rid of market risk, investors commit their funds in portfolio having many securities. This way market risk can be diversified. As closed end mutual funds are not redeemable, fund managers don't need to keep ready cash or sell shares in case share holders suddenly want to sell.

This is a unique type of mutual fund that usually offers its units to the public only once and after that they are traded in exchanges all over the counters. There is not much fluctuation in the prices of shares of close-end fund and it results in high margin for you if you sell shares when it is high assuming you purchase at low prices.

With large number of benefits there are some drawbacks also attached with the close-end mutual funds. You have to pay brokerage fee at time of selling and buying of shares. Stock market’s ups and down have direct impact on the working of close-end funds. Their performance affected seriously when the market slumps.