The wrong time to buy closed-end shares

My broker recommended shares of a new closed-end bond fund. It sounds like a good fund, but I hear that closed-end funds are traded and priced a bit differently than open-end ones. Can you explain?

Open-end funds issue new shares as needed, and investors pay net asset value (NAV) for them-the total of the fund's net assets (after fees and expenses) divided by the number of outstanding shares. In contrast, closed-end funds issue a fixed number of shares that subsequently trade on a stock exchange at a price that often differs from the NAV. At launch time, the trading price typically remains close to the issue price and factors in underwriting fees, commissions, and other start-up costs. Then a few weeks or months later, the price drops. That means buyers who invest early on pay top dollar, while those who wait essentially get their shares at a discount. So if you're interested in the fund, you'd be wise to postpone your purchase for a while.