Closed End Mutual Fund
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Carmen Said:
What is a Exchange trade fund,a closed end fund, a mutual fun, a stock and bond. Pleaseeeee help.?We Answered:
A bond is debt in a single company.A stock is equity (ownership) in a single company
A Mutual Fund (aka open end fund) is a pool of stocks owned by a group of investors who can be redeemed at net asset value (NAV) on a daily basis on demand from the fund sponsor.
A closed end fund is similar except it trades on a stock exchange and is redeemed (sold) at a market price which may be more or less than the value of the underlying securities.
An ETF is very similiar to a closed end fund, except it's structure is a bit different and is designed to keep the market price as close as possible the value of the underlying securities
Nina Said:
What's the difference between ETFs and Closed-end Mutual Funds?We Answered:
There are major differences. Think of an ETF as an open-end ("normal") mutual fund with a set portfolio and trading on a stock exchange instead of through a fund company. As with "normal" mutual funds, your net asset value (price per share) is determined totally by the value of the stocks and/or bonds in the fund. With an ETF you also have to worry about the spread charged by the market-makers, but basically if you have a Spyder it is going to move very closely with the S&P500.Closed-end funds have a set number of shares, just like a stock, and their price moves somewhat independently of the net asset value of the holdings. This can be a blessing or a curse, but it provides arbitrage potential and extra volatility in the long term. If you look in Barron's or the Monday issue of the Wall Street Journal you will see the discount or premium investors are paying for a closed-end fund relative to the value of its portfolio. This is most striking in the single-country international funds. This week's Barron's on page M48 shows Templeton Russia and Eastern Europe (TRF) selling at a premium of 37.6% to NAV, while Central Europe and Russia (CEE) sells at a discount of 4.5% to NAV. If Russia and Eastern Europe tank and TRF's premium vanishes as the region falls out of favor, you can make a killing shorting TRF. Or an arbitrage play would be to buy CEE and short TRF. At some point the market's opinion of these funds is going to converge, giving the potential for gain as the price difference narrows. The risk is that TRF will continue to outperform (both are red-hot but TRF is hotter), so that the price difference doesn't narrow even if the premium/discount converges.
Minor differences:
The big ETF's are more liquid and spreads are smaller.
Closed-end fund managers can trade their stocks, so expenses are generally higher and there are more distributions.
Elsie Said:
Whats the difference between a mutual fund and a closed end fund?We Answered:
Closed end funds have a limited number of shares for sale. Once they are sold, the fund is closed to new investors until someone sells their shares. Regular mutual funds have an unlimited amount of shares to sell.Jerome Said:
Last year, Sue purchased a closed-end mutual fund that was trading at $42 and had an NAV of $38.?We Answered:
D 7.1%The NAV is not relevant to her return. It's just
( ( ( Sale price + divs ) / purchase price ) - 1 ) * 100
Norman Said:
Closed End Mutual fund ?We Answered:
Hard to answer all of these questions. First of all you did not mention what the expense ratio of the fund is. If you want to know what your roi would have been had you held the assets, you need to know the expense ratio. There are other things you would also have to know. What and when the assets of the fund were sold and purchased. To emulate their return you would have to emulate their actions.Do you wish to know your ROI before or after taxes. It makes a difference? Before taxes including your unrealized gain is about 9%. After tax will be somewhat less depending on your tax bracket and your state and local tax rates. Also keep in mind that your brokerage expenses incurred to emulate their actions might very well be considerable on a pro rata basis. They are trading tens of thousands of shares at a time. You would be trading just a few.