Excerpted from Bogle on Mutual Funds by John C. Bogle, page 51

This book is about mutual funds, technically known as open-end investment companies since their shares may be purchased and redeemed each day at their then-current net asset values, plus any sales charges or minus any redemption fees. It is not about closed-end investment companies, which make an initial public offering of shares, after which their shares trade in the marketplace at either a premium or a discount to their net asset values. Since the initial offering price of a closed-end fund includes a sales commission, the shares are inevitably issued at a premium over the assets that will actually be invested. Thereafter, diversified closed-end equity funds almost always trade at a discount. If you purchase closed-end fund shares at a premium price and then sell the shares at a discount, it would not be unusual to sacrifice as much as 20% of your capital. While financial advice should rarely include the words never or always, few investors would have suffered if they had never purchased new offerings of diversified closed-end funds but had instead always purchased shares when they were available in the marketplace at a substantial discount from their net asset value.