1. 20 Investments: Introduction
  2. 20 Investments: American Depository Receipt (ADR)
  3. 20 Investments: Annuity
  4. 20 Investments: Closed-End Investment Fund
  5. 20 Investments: Collectibles
  6. 20 Investments: Common Stock
  7. 20 Investments: Convertible Security
  8. 20 Investments: Corporate Bond
  9. 20 Investments: Futures Contract
  10. 20 Investments: Life Insurance
  11. 20 Investments: The Money Market
  12. 20 Investments: Mortgage-Backed Securities
  13. 20 Investments: Municipal Bonds
  14. 20 Investments: Mutual Funds
  15. 20 Investments: Options (Stocks)
  16. 20 Investments: Preferred Stock
  17. 20 Investments: Real Estate & Property
  18. 20 Investments: Real Estate Investment Trusts (REITs)
  19. 20 Investments: Treasuries
  20. 20 Investments: Unit Investment Trusts (UITs)
  21. 20 Investments: Zero-Coupon Securities
  22. 20 Investments: Conclusion

What Is It?
A closed-end fund is an investment fund that issues a fixed number of shares in an actively managed portfolio of securities. The shares are traded in the market just like stocks, but because closed-end funds represent a portfolio of securities they are very similar to a mutual fund. Unlike a mutual fund, the market price of the shares is determined by supply and demand and not by net asset value.

Closed-end funds are usually specialized in their investment focus. For example, one might concentrate its focus on a particular geographic region. They invest in stocks, bonds and other securities to gain a bit of diversification, but because they focus on one region or industry they are not diversified to the overall market. There are several hundred different closed-end funds actively traded on North American stock markets.

There are also "dual purpose" closed-end funds, which simply means that they have two classes of shareholders: preferred shareholders who receive mainly dividends as income, and common shareholders who profit from the capital appreciation of the fund's share price.

Objectives and Risks
Objectives can vary from fund to fund, so it is important to read the prospectus before investing. (To learn more, see Don't Forget To Read The Prospectus!) Some closed-end funds have capital appreciation as their primary concern, while others are more interested in income.

How to Buy or Sell It

Closed-end funds can be bought on various stock markets with the assistance of a full service or discount broker. There is no minimum number of shares to buy, and selling the funds is very easy and quick. When purchasing a closed-end fund, you are typically charged the usual brokerage commission as well as an annual management fee, usually under 1%.



Strengths
  • These funds are easy to buy and sell on financial markets. Furthermore, they are regulated by the Securities and Exchange Commission.
  • The funds usually invest in hundreds of companies, so they offer good diversification in certain areas.
  • If bought in a tax-deferred account, closed-end funds are a great investment for long-term capital appreciation.
  • Weaknesses
  • Fixed interest payments are taxed at the same rate as income.
  • The price of the closed-end fund is not exclusively linked to the performance of the securities held by the fund. The fund\'s share price depends on supply and demand in the open market.
  • Three Main Uses
  • Capital Appreciation
  • Income
  • Safe Tax Deferred Investment
  • 20 Investments: Collectibles

    Related Articles
    1. Investing

      What Are the Advantages of Closed-End Funds?

      Often forgotten, closed-end funds are publicly traded and can be found on the secondary market.
    2. Investing

      Closed-End Vs. Open-End Funds

      Open-end products may be a safer choice than closed-end, but closed-end funds might produce a better return.
    3. Investing

      An Introduction To Closed-End Mutual Funds

      If you're looking to generate income for your investments, look no further.
    4. Investing

      Closed-End Vs Open-End Funds

      Much like an individual’s wardrobe, many portfolios are collections of separate items. They combine stocks and bonds and other investments into one product.
    5. Investing

      A Brief History Of The Mutual Fund

      This popular investment vehicle has seen its share of ups and downs, successes and scandals. Read all about it!
    6. Investing

      Closing Mutual Funds: Investment Protection Or Trap?

      Discover the characteristics of closing funds, the reasons why they close and key factors to consider.
    7. Investing

      Buying Natural Resources At A Discount

      Recent investor enthusiasm has pushed prices for many assets into bubble territory. By using closed ended funds, investors can buy these assets at a discount.
    8. Investing

      Mutual Funds: Does Size Really Matter?

      The growth of mutual funds isn't always cause for celebration. Read on to find out why.
    Frequently Asked Questions
    1. Depreciation Can Shield Taxes, Bolster Cash Flow

      Depreciation can be used as a tax-deductible expense to reduce tax costs, bolstering cash flow
    2. What schools did Warren Buffett attend on his way to getting his science and economics degrees?

      Learn how Warren Buffett became so successful through his attendance at multiple prestigious schools and his real-world experiences.
    3. How many attempts at each CFA exam is a candidate permitted?

      The CFA Institute allows an individual an unlimited amount of attempts at each examination.Although you can attempt the examination ...
    4. What's the average salary of a market research analyst?

      Learn about average stock market analyst salaries in the U.S. and different factors that affect salaries and overall levels ...
    Trading Center