What is an ETF? Part 2 of 3 (video)
Summary of video: What is an ETF? Part 2: Closed Ended Mutual Funds Key points from this video: You don’t need to learn about closed end funds, but his discussion might help you understand what it means that most mutual funds are open-ended. Closed-end funds are also similar to ETFs, so this may help you understand that. Don’t concern yourself with closed-end funds too much because there is no circumstance where this would be a better idea than low-cost index funds that are open-ended. In an open ended fund (the most common type of mutual fund), when an investor wants their money back they have to deal with the fund itself. In a closed ended fund, once the fund is created if someone wants to buy or sell a share, it happens in the secondary markets. In an open ended fund, there is an incentive to constantly market and grow the fund to get more as management fee. In a closed ended fund, once the fund is created they don’t have to market it anymore. Link to last video: What is an ETF? Part 1: Open Ended Mutual Funds Link to next video: What is an ETF? Part 3: Exchange Traded Funds Transcript of video: What is an ETF? Part 2: Closed Ended Mutual Funds insert some bold keywords and some alternative keywords like exchange traded mutual funds insert some pictures with keywords in captions and jpg filenames. In the last video, we had Pete starting an open ended mutual fund that was managed by Pete Inc. Mutual funds normally have nice grand names. Maybe they call this the Saturn Fund, and if there is a Saturn Fund out there I just picked that name at random. I’m not implying that this is you or anything like that, or something like the Galileo Fund, anything like that. I”m sure there is probably is a Galileo Fund, so once again don’t sue me, I just made up that name on the fly, but it’s managed by Pete Incorporated. We called it an open ended fund because at any time one of the people who own a share, or a unit in the fund, can redeem it back from the fund that Pete or the management company would say, “Okay if you want … If you want, at the end of that video your $180 back we’ll buy that. We’ll give you $180, you give back the share, and then we cancel the share.” If anyone wants to add to the fund, if they want to invest, the corporation can create new shares and then issue it to people, and sell it to people, and then that their money will go into the common pool, and the management company would take fees off of it. What is a closed end fund? That probably had you asking, “Well if this is an open ended fund, what is a closed end fund? Or do they even exist?” They do. That’s what I’m going to […]
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