[CFollansbee]

My advice: go talk to an advisor. With no disrespect to those who have posted, unless they are retired advisors/fiduciaries they may or may not be completely correct in their statement. Let me recommend my fiduciary, David Blackston. Extremely knowledgeable, kind, and a genuinely nice person. If you can’t see him, his son Kyle is in the firm and a few others. An adviser will look at your entire portfolio and give you advice as to your money and growth. Yes, there is a fee but that is their job and I am fine with that. I have been 100% satisfied with them for the last 7 years. Blessings.

[jimjamuser]

Originally Posted by CFollansbee

My advice: go talk to an advisor. With no disrespect to those who have posted, unless they are retired advisors/fiduciaries they may or may not be completely correct in their statement. Let me recommend my fiduciary, David Blackston. Extremely knowledgeable, kind, and a genuinely nice person. If you can’t see him, his son Kyle is in the firm and a few others. An adviser will look at your entire portfolio and give you advice as to your money and growth. Yes, there is a fee but that is their job and I am fine with that. I have been 100% satisfied with them for the last 7 years. Blessings.

My advice is to put the money into an ETF. Forget ALL "advisors" and "managed" funds. The basic S + P ETF has always outperformed "managed" funds. The PRESSURE to manage the funds causes bad decisions and excessive buying and selling.

[Ecuadog]

Originally Posted by crash

... Most of these funds pay 6% or more. These funds are more about income then capital gains.

Bingo.

[spinner1001]

Originally Posted by LuvtheVillages

I just explained the advantage for some of these funds - If the closed end fund is trading at a discount to its Net Asset Value, you can buy a dollar's worth of stocks for less than a dollar.

^^^

*This* is the main motivation for a buyer of a CEF. Looking for a bargain price from mispricing.

The biggest disadvantage for a typical buyer of a CEF is less liquidity than traditional mutual funds.

Looking for a bargain of a CEF share price does not mean it is actually a bargain. The price discount may reflect a illiquidity discount of rational investors rather than mispricing.

If you are looking into a CEF, look at the fund’s trading volume and not just the price to net-asset-value ratio. If you own CEF shares, will be be able to sell them quickly without a discount?

[spinner1001]

Originally Posted by crash

If it doesn’t adjust to NAV you still have been paid a good return from the dividend. Most of these funds pay 6% or more. These funds are more about income then capital gains.

The bigger dividend yield of say 6% mainly happens because of a CEF’s typical discounted share price.

For instance, suppose a traditional income-oriented mutual fund pays dividends of $5 (per fund share) and the fund’s shares trade for $100. A buyer of one fund share earns a 5% dividend yield.

$5 / $100 = 5%

Now, suppose an otherwise identical CEF holds the same underlying investments and the CEF shares trade at a 20% discounted price compared to the traditional fund’s shares — it trades for $80 rather than $100. The CEF investor still gets $5 per share in dividends on their $80 investment — about a 6% dividend yield.

$5 / $80 ~ 6%

A CEF produces a higher dividend yield that an otherwise identical open-end mutual fund because its shares trade at a discount. It’s math.

But if investors are rational, why would CEF sellers accept a $80 share price when an otherwise identical open-end fund trades at $100? Perhaps buyers require a illiquidity discount on the CEF shares. Or the sellers at $80 are not actually rational.

[Boomer]

Thank you to all who have posted in this thread. The information you are providing to me is helpful. I had read about CEFs, but I often find that a little informal conversation can shed more light on a subject.

I do not own any CEFs. My friend does. Her advisor is with one of the giant wirehouses and she has been with him for a few years.

She does not ask questions. But she asked me to look at the report. I think I am going to give her a list of questions to ask the guy when they meet. Everything might be just fine, but she needs a lot of clarification on what she owns and why — and where the costs and fees are. (She will probably want to drag me along with her. . .He will not like me, although I will be all dressed up and charming and will smile my very best smile.)

Why is it that so often the people who are the smartest, especially in one field, do not like to ask questions? She is super smart.

Next question: If she decides she likes her CEFs, after the questions are answered, and she wants to keep them — but also then decides that her advisor is a weenie, can CEFs be transferred in-kind to a different advisory firm? (I know that probably depends on how proprietary the funds are.)

Boomer

[retiredguy123]

Originally Posted by Boomer

Thank you to all who have posted in this thread. The information you are providing to me is helpful. I had read about CEFs, but I often find that a little informal conversation can shed more light on a subject.

I do not own any CEFs. My friend does. Her advisor is with one of the giant wirehouses and she has been with him for a few years.

She does not ask questions. But she asked me to look at the report. I think I am going to give her a list of questions to ask the guy when they meet. Everything might be just fine, but she needs a lot of clarification on what she owns and why — and where the costs and fees are. (She will probably want to drag me along with her. . .He will not like me, although I will be all dressed up and charming and will smile my very best smile.)

Why is it that so often the people who are the smartest, especially in one field, do not like to ask questions? She is super smart.

Next question: If she decides she likes her CEFs, after the questions are answered, and she wants to keep them — but also then decides that her advisor is a weenie, can CEFs be transferred in-kind to a different advisory firm? (I know that probably depends on how proprietary the funds are.)

Boomer

The answer to your question is yes, unless the CEF was started and is directly managed by the advisor's company. In that case, she can still keep the fund and have another company track it, but the original company will still be managing the fund and receiving the built-in fees. It would be like transferring your assets from Vanguard to Fidelity, when you own Vanguard mutual funds. Fidelity will track the Vanguard funds in a Fidelity portfolio, but Vanguard will still manage the fund.

[Boomer]

Originally Posted by retiredguy123

The answer to your question is yes, unless the CEF was started and is directly managed by the advisor's company. In that case, she can still keep the fund and have another company track it, but the original company will still be managing the fund and receiving the built-in fees. It would be like transferring your assets from Vanguard to Fidelity, when you own Vanguard mutual funds. Fidelity will track the Vanguard funds in a Fidelity portfolio, but Vanguard will still manage the fund.

Thanks. Ironically, I just bought a Vanguard fund on the Fidelity site. I had never seen that before. It surprised me to see it there.

Boomer

[retiredguy123]

Originally Posted by Boomer

Thanks. Ironically, I just bought a Vanguard fund on the Fidelity site. I had never seen that before. It surprised me to see it there.

Boomer

Note that individual stocks are not like mutual funds. You can transfer specific stocks from one broker to another and there is no taxable event. But, if you sell the Vanguard S&P 500 index fund and substitute the Fidelity S&P 500 index fund, it is a taxable event, even though the two funds are very similar in the stocks they contain. That is why both companies allow you to hold the other company's funds in their portfolio.

[spinner1001]

Originally Posted by Boomer

Why is it that so often the people who are the smartest, especially in one field, do not like to ask questions? She is super smart.

“The more you know, the more you realize how much you don’t know. The less you know, the more you think you know everything. Knowledge is humbling. Ignorance is arrogant.”

[retiredguy123]

Originally Posted by spinner1001

“The more you know, the more you realize how much you don’t know. The less you know, the more you think you know everything. Knowledge is humbling. Ignorance is arrogant.”

I agree. Too many people make the mistake of buying investments without knowing what they are buying.

There is a guy named Ty Young, who sells annuities on television, but he never calls them annuities. He does not want you to know what you are buying.

[Boomer]

Originally Posted by retiredguy123

Note that individual stocks are not like mutual funds. You can transfer specific stocks from one broker to another and there is no taxable event. But, if you sell the Vanguard S&P 500 index fund and substitute the Fidelity S&P 500 index fund, it is a taxable event, even though the two funds are very similar in the stocks they contain. That is why both companies allow you to hold the other company's funds in their portfolio.

Thanks, retired guy123. I wondered how that works. Makes sense from a marketing standpoint. Vanguard is so famous for Bogle’s long ago wide implementation of index funds that by making some Vanguard available, Fidelity investors can stay put and still own a Vanguard.

I have been having a little fun (yes, I said fun. ) looking at the Fidelity Select Index Funds — something for everybody there.

I was also rather intrigued to see a category called “Disruptive Funds”….. maybe those should be called FOMO Funds.

Psychologically speaking, Disruptive Funds could provide a way to gamble on the future of innovation — scary as some of that can be — without taking a big gamble on an individual stock. There are disruptive funds that are select and there is at least one that includes all types of innovation.

I am not the type of investor who would put a lot of money into “new fangled” stocks, but might have to put a few bucks into one of these disruptive funds — and I do mean a few bucks, very few, just to have some fun. (I do find the word ‘disruptive’ to be a bit disconcerting though. )

I know a guy who lost his shirt and probably his pants by throwing a lot of money into crypto. He was retired — “was” is the operative word there.

Boomer