Offering Explanations

Q

Can you explain what “closed-end” funds are? — F.E., Dothan, Alabama A Closed-end funds (CEFs) are similar to mutual funds, but with a twist. Both collect dollars from investors and deploy them into investments chosen by professional money managers. But when closed-end funds are created, a set number of shares are sold to the public, raising a fixed amount of money. After that, the shares generally trade in a secondary market, like stocks do. Also like stocks, their prices are based on supply and demand, unlike traditional mutual funds, whose prices are based on the values of the securities (such as stocks and bonds) they hold.

If you buy shares of a traditional mutual fund, your dollars go to the mutual fund company, which will issue more shares and invest that money; when you sell, it will redeem your shares at the fund’s current net asset value (NAV), less any fees. But when investors buy or sell CEFs, they transact with other buyers or sellers, not with the CEF company.

Closed-end funds come in several varieties. They can be volatile, occasionally charging high fees. Learn more before investing in any, starting at Investor.gov.

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Q

What are “esports”? — D.H., Broken Arrow, Oklahoma

A

Esports are, as you might have guessed, sports played online — in the form of video games, such as League of Legends and Overwatch. They’re not just for players, though — esports also feature spectators, with dollars flowing from sponsorships, advertising, ticket sales, media rights and more.

Esports have become increasingly popular in recent years, with tens of millions of viewers and some teams valued at hundreds of millions of dollars. One estimate is that the industry will rake in $1 billion in 2021.

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