A "closed-end fund," legally known as a "closed-end company," is one of three basic types of investment company. The two other basic types of investment companies are mutual funds and unit investments trusts (UITs).
Here are some of the traditional and distinguishing characteristics of closed-end funds:
Closed-end funds come in many varieties. They can have different investment objectives, strategies, and investment portfolios. They also can be subject to different risks, volatility, and fees and expenses.
Keep in mind that just because a fund had excellent performance last year does not necessarily mean that it will duplicate that performance. For example, market conditions can change and this year’s winning fund could be next year’s loser. To understand the factors you should consider before investing in a mutual fund, read Mutual Fund Investing: Look at More Than a Mutual Fund's Past Performance. In addition, you should carefully read all of a fund’s available information, including its prospectus and most recent shareholder report before purchasing mutual fund shares.
Closed-end funds are subject to SEC registration and regulation, which subjects them to numerous requirements imposed for the protection of investors. Closed-end funds are regulated primarily under the Investment Company Act of 1940 and the rules adopted under that Act. Closed-end funds are also subject to the Securities Act of 1933 and the Securities Exchange Act of 1934. You can find the definition of "closed-end company" in Section 5 of the Investment Company Act.http://www.sec.gov/answers/mfclose.htm