Open-End vs. Mutual Firms

by David Jenyns on September 8, 2008

Undoubtedly, the word “mutual” has sales value, for it is associated with savings banks and certain life insurance companies. Open-end companies are management companies, and as defined in the Investment Firm Act, have two main traits:

2. Open-end companies agree to redeem or repurchase their outstanding shares on short notice by paying the investor in cash the net asset value per share of his stock.

1. Common stock funds invest largely in a diversified list of common stocks. 2. Balanced funds attempt to provide a complete portfolio and invest more of their funds in bonds and preferred stocks. The second type is made up of class-of-security funds, i.e., investments are confined to bonds or preferred stocks, or to special classes of stocks, such as low-priced common stock or second-grade railroad bonds. The stocks owned represent equities of companies that operate in these areas.

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