Closed end funds are like the dark horse of the investment world.
They are not mentioned much but they could make you some serious money.
So first, let's walk through what they are and then we can talk about their upside.
What is a Closed-End Fund?
The name is deceiving because a closed-end fund (CEF) is more like a stock than an open-end, or regular, mutual fund.
When you buy a regular mutual fund share through your broker or a fund company, the shares basically trade or settle -- once a day. The number of shares of a regular mutual fund theoretically is unlimited.
A CEF, on the other hand, is like a public company. It has an initial public offering and then can only offer a fixed number of shares. Those shares then are traded on an exchange, which often is the over-the-counter market because they're generally much smaller entities.
But they trade all day, just like an individual stock. So you can buy and sell whenever you want, and much like a stock, you want to buy low and sell high.
Benefits of CEFs
One of the bigger benefits to CEFs is that the underlying portfolio is less exposed to market risk. Unlike an ETF that has to adjust its holdings if the corresponding index changes, CEF portfolio managers do not have to sell with every market move. They make more purposeful decisions and more long-term.
Check out the link below for more.
How to Find Low Price Closed-End Funds
Like a stock, ideally you want to buy low, or when the shares are at a discount.
The folks from Nuveen Investments, explain why that is important to your overall portfolio returns, but not essential.
Watch below now.
CEFs are for Millennials too
And finally because closed end funds offer an income component, it often is assumed that they are mainly for retirees looking for a distribution. But that shouldn't be the case. Everyone -- including millennials -- can use an income stream in their portfolio so it is important that investors of all ages consider them.
Miss our webinar, Why Closed-End Funds Could Deliver a Powerful Income Portfolio Boost ? Click here!