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Subject:  Re: Closed End Mutual Funds Date:  3/19/2001  11:44 PM
Author:  Chipsboss Number:  6395 of 20640


Your quite welcome.

Since CEF trade like stocks, are they similar to exchange traded funds? Sorry, I don't know enough about exchange traded funds to comment.

I assume one pays a commission to buy and sell a CEF plus a yearly management fee. Right, commission in and out and annual management fees. Bergstrom (BEM) makes it a point to keep fees very low, unlike most other closed end funds. Try going to, searching that site for "Bergstrom". This gets you an article (free) entitled "High-Growth Hotshot" by Michael Freedman, Forbes Magazine, 09.04.00 Another exerpt: "Our advice: Wait until Bergstrom's discount widens to its historical norm, 10%, to buy in. As a long-term investor you stand to do well with this fund, which has logged a 23% annualized return since mid-1990, beating the FORBES closed-end composite by seven percentage points."

Does the performance of CEF justify the costs?
Depends on the fund. My general preference is for no-load, minimum management fees, index funds. My major holdings are Vanguard Index 500 VFINX and Schwab 1000 SNXSX. My holding in BEM was prompted by reading about it in Forbes years ago. Here's the pitch: suppose you had a rich uncle who was willing to manage your money for you in the account where he manages millions of his own dollars. That rich uncle is Erik Bergstrom, of whom you may read in the Forbes site. Unfortunately, Mr. Bergstrom seems to be sidling toward retirement. (The management fee is about 0.5% / year)

Do CEFs pay out large, taxable distributions that open ended mutual funds often pay out? I don't know about the other funds. Another reference on BEM
It says BEM declared a cash dividend of $17.75 per share payable June 5, 2000. Its current policy is to pay about 6% each June. For that reason, I'd hold it only in a tax-deferred account. Mine is in my IRA at Schwab. I reinvest the dividends in more shares with no commission there. Of course, the capital gains on the investment will eventually come out of the IRA and be subject to ordinary income tax rates. (Unless, perish the thought, I expire prematurely, in which case the IRA will pass tax-free to the National Taxpayers Union Foundation, for exposing those scalawags in Congress.)

This post probably should have been in the BEM board, but that board has been inactive for over a year.

Chips, who may very well dump his BEM one day for more VFINX

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