The main difference between a closed-end fund and an open-ended fund such as Magellan is that a closed-end fund is static. The number of shares stays the same. A shareholder in a closed-end fund exits the fund by selling his or her shares to somebody else, the same as if he or she were selling a stock. An open-ended fund is dynamic. When an investor buys in, new shares are created. When the investor sells out, his or her shares are retired, or “redeemed,” and the fund shrinks by that amount.
