Mutual funds gained popularity among the investing public in the 1980s and 1990s. They began as a way for large institutional investors to pool their money for a common purpose, and spread the risk of losses, inside a mutually owned fund, hence the name mutual fund. Now, mutual funds are a staple of most everyday Americans’ nest eggs and is considered a good way to diversify your retirement plan.
What you may not be aware of is that there are in fact various types of mutual funds. The two main ones are open-end and closed-end. Understanding the differences between them can help you broaden and strengthen your investment portfolio asset allocation based on your investment risk tolerance.