Like open-end funds, closed-end funds hold portfolios of securities at the discretion of the manager. They do, however, differ in one key respect. Mainly, rather than mint shares when an investor wants to buy or cancel when there’s selling, closed-end funds trade a fixed number of shares on a major exchange. You never cash out or in. You buy and sell on the exchange just as you would a common stock or trust.
The dreaded D-word has been getting a lot of play in the media today, with the Consumer Price Index posting its smallest increase, 0.1 percent, in 54 years in 2008. Plunging commodities prices in the back half of the year played a large role, with energy costs falling 8.3 percent and food prices down 0.1 percent. Falling consumer prices continue to fuel worries that we may be in a deflationary spiral.
Although stones have been thrown at Alan Greenspan over the years about his “free money” policy in response to our last recession, the statement was largely metaphorical. Now it’s moving into the realm of reality.
Mutual funds remain one of the best investment vehicles for individuals, especially in troubled markets. Holding even just a few funds, you can protect yourself on the downside while positioning yourself for the turn.
Many fund managers can profit no matter which direction the markets are moving. But is it skill or beginners luck?
As I’ve said in past few weeks, the financial sector remains interesting for investors with a fairly high risk tolerance, and it’s time to wait for the sector to turn around. Ironically, there are two mutual funds out there that focus on the financial sector and are outperforming the S&P 500 in a pretty impressive way.
There are some tall tales going around about fees supposedly charged investors by our favorite closed-end and open-end mutual funds. The good news is it’s easy to set the record straight.
