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Retirement Discussions / Retired Fools
|Subject: Re: Closed End Mutual Funds||Date: 3/23/2001 10:00 AM|
|Author: GrayWulff||Number: 6418 of 19522|
Hi, GW!Is it best then to get out of a closed end fund as quickly as possible upon learning of it? Do they ever continue to gain in value long term?
There is no simple answer. A well managed, low-cost closed end fund could be a very good investment. If you are already in one, then you need to examine past performance very carefully and you need to look at your tax situation. If selling would produce capital gains then you might want to hold on. If the fund is a real dog, then you might want to sell even though you have gains. If you have losses and don't like the fund then by all means sell and let Uncle Sugar underwrite your losses.
It sounds like there is no advantage for the investor to continue to hold a closed end fund. What is the fund managers purpose for doing so?
Commissions and annual fees.
It would seem if there are fewer investors involved and the fund continues to gain in price there are fewer to divide the spoils amongst.
Spoils, if any, are divided based on shares of ownership; so it really doesn't matter how many owners there are.
I'm a big fan of S&P500 index funds. I'm no expert at CEF's. I advise you to compare your funds performance to VFINX, Vanguard's S&P500 index fund. It's a very good fund and will give you an idea of what is possible.
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