Closed-End Funds
What is a closed-end fund? A closed-end fund is a mutual fund (or unit investment trust) that trades on a stock exchange (such as NYSE, NASDAQ, or AMEX) at a premium or discount to its NAV (net asset value).
Because a closed-end fund shares trade in the stock market based on investor demand, the fund may trade at a price higher than its NAV. In addition, due to less than favorable demand for its shares (for various reasons)…a fund may trade at a price lower than its NAV.
There are two types of closed-end funds; one is a closed-end stock fund, and two is a closed-end bond fund. You can view the listings for closed-end funds on Mondays in The Wall Street Journal. It will disclose market prices, discounts or premiums, and the stock exchange which it’s traded.
The average yield of a closed-end fund is 8.5%. And if you focus on closed-end funds that trade at discount (producing a high yield)…you can find yourself a very comfortable income investment.
Simply evaluate the underlying portfolio for risk, your income requirements, evaluate the discount and yield, analyze any borrowings (leverage), and of coarse the fund managers track record. Once you have found several funds that you have an interest in…call your stock broker up and determine your allocation strategy to invest in this sector.
Sincerely,
John Bagwell
The Truth About Financial Products.com - Blog
www.thetruthaboutfinancialproducts.com
