The main difference between a CEF and an exchange-traded fund (ETF) is the propensity of a CEF to trade at a premium or discount to its net asset value (NAV). While ETF's are arbitraged to within a fraction of a percent from their NAV, CEF's lack that level of arbitrage, perhaps because they are usually more thinly traded, and are not viewed as adequately liquid. Sometimes a CEF can trade for a discount of 10%, 20%, or even more.
Unlike the (probably) more familiar open-end mutual fund, a closed-end fund issues a certain number of shares when it first gets started, and that's all the shares that are available. It's closed to new money, however, investors can buy and sell the shares among themselves on the market. So you can invest in a closed-end fund, but only when someone else wants to divest and sells shares to you.
Another key difference between a closed end fund or ETF vs mutual funds is that they trade at market prices throughout the day. Mutual fund transactions usually occur once daily at the NAV calculated at the end of the day. Hence, in a volatile market, prices of CEFs and ETFs more closely track market conditions. The recent after hours trading scandals of some mutual funds highlight one method insiders have used to exploit this difference.
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