What is the main difference between open-end and closed-end mutual funds?

The main difference highlighted in the correct choice revolves around how open-end and closed-end mutual funds handle their shares in relation to their net asset value (NAV) and market trading.

Open-end mutual funds operate by constantly issuing and redeeming shares directly to investors. When you want to invest in an open-end fund, you buy shares directly from the fund company at the current NAV, which is calculated at the end of each trading day. This means that the price you pay reflects the actual value of the fund's underlying assets at that moment.

On the other hand, closed-end funds do not issue or redeem shares on an ongoing basis. Instead, they issue a fixed number of shares that trade on a stock exchange. The market price of closed-end fund shares can fluctuate independently of the NAV, meaning they may trade at a premium or discount to their NAV depending on market demand and investor sentiment.

This distinction is critical to understanding mutual fund structures. Open-end funds focus on liquidity and investor redemption at NAV, ensuring that every investor gets a value aligned to the fund's current asset value. In contrast, closed-end funds provide a different investment mechanism, where the trading of shares on the exchange introduces price variability based on market conditions.

The other choices contain inaccuracies