What is the difference between an open-end and a closed-end mutual fund?

The distinction between open-end and closed-end mutual funds primarily revolves around their structure and the way shares are bought and sold. Open-end funds continuously issue and redeem shares at their net asset value (NAV), meaning that investors can purchase or sell shares directly from the fund at current NAV at any time. This allows for flexibility and liquidity directly tied to the fund's performance.

In contrast, closed-end funds have a fixed number of shares after their initial public offering; these shares are then listed on a stock exchange and traded among investors. The market price of closed-end fund shares can fluctuate based on demand and supply on the exchange, and it may trade at a premium or discount to the net asset value.

Thus, the correct choice highlights how open-end funds provide transactions at NAV while closed-end funds operate with a fixed number of shares traded in the market, illustrating the key operational differences between the two types of funds.