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scottnlena
Posted : Monday, December 31, 2007 11:15:46 PM

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Joined: 4/18/2005
Posts: 4,090
what exactly are these?  I've got several coming up in my scans tonight.

DHG
JLA
VGM
HIX
BTZ
XOMA
 are the most interesting to me at this point.

pkbldr
Posted : Tuesday, January 1, 2008 10:40:20 AM
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Joined: 12/9/2005
Posts: 24

Scottnlena,

I'm with you, not real clear on these.
I suspect I know enough to be dangerous.
I hope someone with experience in these funds will be gracious enough to either post a primer, or recommend a 'Funds for Dummies' sort of book.
They definitely are multiplying like rabbits.
Happy New Year to All.
 
NutOnABike
Posted : Tuesday, January 1, 2008 2:39:11 PM
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Joined: 12/6/2004
Posts: 48
QUOTE (pkbldr)

I hope someone with experience in these funds will be gracious enough to either post a primer, or recommend a 'Funds for Dummies' sort of book.


Closed-End Funds can be excellent investments.  Scott Arends in the Dec 21st WSJ said with CEFs "you can buy $100 worth of professionally managed investments for just $85 or less" and many are currently at bargain basement levels.

CEFs are similar to ETFs with an important difference.  ETF's trade at a price very close to or equal to the Net Asset Value (NAV) of the underlying basket of stocks.  With CEF's, the price is traded openly on the market, and prices often vary widely from the NAV.  Currently many CEFs are trading at 10%, 15% discounts to the NAV.  Also, dividends are paid on the NAV not the price.  This has the effect of boosting yields when CEFs are at discount.

I have a Telechart scan that looks at the CEF industry groups and shows only those where yield > 7%.  Then, I check the ETFConnect website for information about the CEF's discount, the dividend consistency, the fund's strategy, etc.

DPD is a good example.  It owns the Dow 30 and writes covered calls for income.  It's trading at 10% discount and pays 10% yield.  It's paid a 15cent per share dividend for 31 consecutive months.  I know of no other investment out there that offers assets at such deep discounts, pays a high yield and has a low beta. IMHO the trick is to not trade them but to buy dips, hold, and let the dividends reinvest. ESD is another good candidate for diversification. It owns government bonds from emerging but growning nations like Brazil, Mexico and Russia. It's been a solid performer for several years.  ESD currently trades at a 13% discount with a 9.5% yield.

I can go on and on about CEFs... I have them in my portfolio as a diversification against regular stock trading.  CEFs have been steady income providers for me.  I'm about 1/3rd cash, 1/3rd CEFs, 1/3rd stock trading.
realitycheck
Posted : Tuesday, January 1, 2008 2:50:39 PM
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Joined: 9/25/2007
Posts: 1,506

Agreed NutOnABike ...

Some of the earliest that I remember were done by Templeton ... who it seems has always managed to be pioneers into emerging markets ...

The Templeton Dragon Fund "TDF" offered a way into many Asian markets ... when it seemed that few other pathways were readily available ...

A closed end fund differs from a normal "open end" mutual fund in that it is only capitalized once ... instead of perpetually .... i.e. ... 20 million shares @ $15/share .... and that's it ...

The managers then manage that capital just as they would in an open ended mutual fund ...

Much like private equity funds ...

And since they are free to float on the open market ... they can trade at deep discounts ... or steep premiums ... to their Net Asset Value ...

survivor
Posted : Tuesday, January 1, 2008 3:09:00 PM

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Posts: 319
Here's the  Closed-End Fund Associations web site you might wish to check out:

http://www.closed-endfunds.com/

scottnlena
Posted : Tuesday, January 1, 2008 7:42:52 PM

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Joined: 4/18/2005
Posts: 4,090
If I buy a CEF through a broker like IB will it automatically reinvest or do I need to do that manualy?

  Also I was reading something about these in Curtis Faith's book and he says that these funds with agressive trading strategies can have some serious negative sideaffects.

Thanks all
laphill
Posted : Tuesday, January 1, 2008 8:03:13 PM
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Posts: 393
IMO it's best to put all mutual and closed end funds in an IRA or 401k for tax shelter reasons.
pkbldr
Posted : Wednesday, January 2, 2008 8:32:31 AM
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Joined: 12/9/2005
Posts: 24
Survivor,
Thanks for the website link to Closed-End Fund Associations web site.
That is exactly what I was looking for.
They have a 36 page downloadable brochure, "Understanding the advantages of Closed-End Funds".
Also thanks to the other posters for their insights.
This forum continues to be a valuable asset to anyone frequenting here.
May it always be so.
Thanks
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