The vast majority of mutual funds and exchange-traded funds (ETFs) available to retirement investors are open-end funds, but you might find that certain closed-end funds can play an important role in your portfolio.

A closed-end fund is a fund that offers a set number of shares. Like other ETFs and mutual funds, a closed-end fund is made up of a collection of securities and can provide investors with an easy way to build a fully diversified portfolio.

PROS Asset managers can utilize leverage to boost returns May offer higher returns

CONS Actively managed CEFs may have higher expense ratios than passively managed funds Usually carry more risk

Open-end funds produce or delete shares to meet demand, unlike closed-end funds. When you buy open-end fund shares, the asset manager uses the money to buy more fund assets.

PROS No risk that fund market value will trade below net asset value Marked to market — i.e., the share price always matches the net asset value

CONS No opportunity for market value to exceed net asset value Can only be traded once per day

Open-end or closed-end, a fund managed by a business that routinely beats its benchmark index is a strong investment. Open-end vs. closed-end funds are more about alternatives.