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Closed-End Funds

Closed-end funds – like open-end or mutual funds – establish a portfolio of securities and issue shares of the portfolio to the investing public. And as with mutual funds, each share represents an undivided interest in the portfolio of securities. Unlike mutual funds, however, closed-end funds typically issue shares to the public only once. They do not continually sell new shares or redeem already-outstanding ones. Therefore, the number of closed-end fund shares outstanding (the company's capitalization) tends to remain, for the most part, fixed.
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Disadvantages and Advantages of Mutual Funds

The popularity of mutual funds can be attributed to the numerous advantages that they afford investors, some of which are listed below:
Diversification - Most financial professional believe that diversification is one of the best ways to enhance a portfolio's risk-adjusted return.
Low minimum investment - Mutual funds make it possible for investors with very little cash to own an undivided interest in a diversified portfolio.
Professional management - Mutual funds give investors access to professional managers whose required minimum account size would otherwise put their services out of the reach of many.
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Diversification

Diversification is the idea of spreading out your money across many different types of investments. When one investment is down another might be up. Choosing to diversify your investment holdings reduces your risk tremendously.

The most basic level of diversification is to buy multiple stocks rather than just one stock. Mutual funds are set up to buy many stocks (even hundreds or thousands). Beyond that, you can diversify even more by purchasing different kinds of stocks, then adding bonds, then international, and so on.
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