Which type of management companies allow for the purchase of fractional shares?

Which type of management companies allow for the purchase of fractional shares?

• A. Closed-end
• B. Open-end
• C. Hedge funds
• D. Private equity firms

Answer: (B)

Open-end management companies, commonly known as mutual funds, allow for the purchase of fractional shares. This feature makes them accessible to a broader range of investors, as individuals can invest smaller amounts of money without needing to buy whole shares. Open-end funds continuously issue new shares and redeem shares from investors, which means they can accommodate investments of varying sizes and allow fractional share purchases to facilitate investment at whatever dollar amount an investor chooses. In contrast, closed-end funds issue a fixed number of shares and trade on an exchange, similar to stocks, which typically requires purchasing whole shares. Hedge funds and private equity firms are generally structured differently, focusing on specific investment strategies or pooling large capital investments, and often impose significant minimum investment requirements that do not align with the concept of fractional share purchasing.

Open-end management companies, commonly known as mutual funds, allow for the purchase of fractional shares. This feature makes them accessible to a broader range of investors, as individuals can invest smaller amounts of money without needing to buy whole shares. Open-end funds continuously issue new shares and redeem shares from investors, which means they can accommodate investments of varying sizes and allow fractional share purchases to facilitate investment at whatever dollar amount an investor chooses.

In contrast, closed-end funds issue a fixed number of shares and trade on an exchange, similar to stocks, which typically requires purchasing whole shares. Hedge funds and private equity firms are generally structured differently, focusing on specific investment strategies or pooling large capital investments, and often impose significant minimum investment requirements that do not align with the concept of fractional share purchasing.