Great Opportunities with Closed-end Funds
Closed-end funds are able to offer you with some great opportunities.
For instance, here is what would have happened if you’d purchased the following closed-end funds 5 years ago:
- The India Fund (IFN) has gained 382%.
- The New Ireland Fund (IRL) has gained 310%.
- The Emerging Markets Telecomm fund (ETF) has gained 154%.
- The Equus II has gained 82%.
Of course, as with everything else in life, there is a catch. If you had purchased Brantley Capital 5 years ago, you would have lost out today because it is now down 74%. So, as you can see, sometimes cheap investments are cheap because because of just how bad they really are.
If you go to www.closed-endfunds.com you will see which funds are selling at the steepest discounts. Here are some of the other ways in which you can improve your odds of picking a good closed-end fund:
- Purchase those that only dip between 3 to 5% their long-term average.
- Purchase closed-end funds after a dividend cut because usually the worst is over.
- Never purchase a newly issued closed-end fund. Instead, wait about 6 months and you will be able to buy it for a cheaper price.
- Never purchase a fund at a premium. There is no good reason to pay more for a fund than the value of its portfolio. In fact, when a fund goes from a discount to a premium it is a good idea to sell the fund.
While it is possible to get really burnt by a deep-discount closed-end fund. However, if you do your research and only purchase a small group of them, then you should do well.
