Why do mutual funds 'close'?

Q: Through my 401K at work, I have invested in Fidelity Low Priced Stock Funds with about $15,000 in that particular fund currently. Over the past 3 years, its’ had some ups and downs, but overall it’s a solid performer. Four months ago I received a letter stating that it was going to be closed to new investors. What would be the reason behind this? Should I worry? — Mark V., Grant Park, Ill.

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A: There are a number of reasons why a fund manager chooses to close a fund to new investors, but one of the most common is that he or she doesn’t want the fund to get too big. According to Morningstar.com, “compared with its peers, this fund has a large number of portfolio holdings and small positions in those holdings.”  

So if the fund managers like to keep their positions small, they’ll have a harder time doing so if they have too much cash to invest.