August 17, 2019
March 30, 2017
A few pointers:
High real rate of return = high risk, no get around, no magic
Closed end funds usually are more restricted and investor has to be mindful of withdrawal restrictions etc
Any fund manager can only generate a real high rate of return consistently if he/she is an investment super star. In other words, mkt average return (dividend and/or interest) is X while the manager manage to return Y, with Y >> X.
Most of these fund do is they return your own capital as part of your "annual return" to jack up the rates. Look at the tax breakdown on the return for these funds and see how much is return of capital vs "real return"
You will notice if stock price does not move much over time, it is one of those.
Otherwise you would imagine a 10% return fund when mkt is at 3%, the stock price will go thru the roof if it is real.
April 6, 2013
Many of them don't allow withdrawals. Only way to get out of them is to sell.
If one wants to sell and others do as well, then one will not get net asset value for them.
Don't believe the garbage about buying $1 of assets for $0.80 when a closed-ended fund trades at a 20% discount. There's no sure way to realize that extra 20%. Investors usually get non-voting shares. So, they cannot force a windup of the fund and receive the net asset value.
When one sells, the fund could still be trading at a 20% discount to net asset value or even more.
August 17, 2019
December 29, 2018
April 27, 2017
Close end funds offer extra risks and extra opportunities. In general, markets are efficient, the prices are right and its very hard to find money lying on the road. Does happen though. Occasionally closed end funds offer this opportunity due to price mismatches.
A couple of years ago a closed fund of municipal US bonds (NBD) was trading at 20% below NAV. No new “build America” bonds were to be issued so the fund announced plans to liquidate. That’s when I bought it. Liquidation means you are paid NAV. Sure enough, the price started to approach and soon matched NAV. That’s when I sold it. Money really was lying on the road waiting to be picked.