Closed-end mutual funds are primarily characterized by which feature?

Closed-end mutual funds are primarily characterized by having a fixed number of shares. This distinctive feature means that once the fund is launched through an initial public offering (IPO), it does not issue additional shares or redeem shares at the net asset value (NAV) as open-end funds do. Instead, investors buy and sell shares of closed-end funds on the stock exchange at market prices, which can differ from the NAV due to supply and demand dynamics.

The fixed number of shares provides a clear distinction between closed-end funds and open-end funds. In the case of open-end funds, share purchases can increase the number of outstanding shares, and redemptions can decrease it, which does not apply to closed-end funds. This structure can lead to a variety of market prices due to investor perception and overall market sentiment, leading to the possibility of shares trading at premiums or discounts relative to their NAV.

In contrast, other features mentioned in the alternative choices are not representative of closed-end mutual funds. For example, the aspect of being "bought and sold on demand at NAV" pertains to open-end funds, which allow shares to be bought and sold directly from the fund at the NAV. The notion of "trading only at the time of IPO" inaccurately describes