The only way of finding the limits of the possible is by going beyond them into the impossible - Arthur C. Clarke
Closed End Bond Funds can be a shelter in the time of storm in many ways and for many reasons. All around the world, countries, especially the United States, are focused on bailing out or boosting their individual economic situation. There are closed-end version of both taxable and tax free bond funds.
In the case of the United States, with the mood of the investment market being all over the place due to the situation of the military operations in Iraq and Afghanistan, and the ups and downs of the job market coupled with a number of other factors involving the quality and sustainability of life in general, for investors who are looking for a way to keep a roof over the head of their portfolio and a way to generate income at the same time, closed end funds appear to be the way to go. These funds are limited in share numbers, move fast like stocks, have a 2-10% discount rate, and carry an income tax exemption which makes them a very popular investment in the financial world.
An economic downturn causes the market to fluctuate on a daily basis and sometimes even on an hourly basis,which plays right into the hand of closed end bond funds, so to speak, since this activity causes the discount level to be lower. For example, if shares are trading at an 11.77% rate, the price of a share is $11.77 but the asset worth is actually $12.77.
While it is true that how investors feel about a certain stock effects the number of shares bought and sold on any given trading day the price does not change during the trading day. Open end funds create shares based on the market demand while closed end funds do not since the number of shares is fixed.
Considering volatility, closed end shares yield more bang for your buck.
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