What Is a Closed-End Fund?

CEF Connect describes itself as the authority on closed-end funds, so its education center might be the obvious starting point in a visit to its website.

“Closed-End funds are generally designed for regular cash flow,” we’re told. The potential CEF advantages begin with income distributions to investors on a regular schedule—for the most part, monthly or quarterly.

That feature appeals to me a lot more now than I’m retired.

In CEF Fund Key Concepts we quickly discover two important bits of information:

“If the net asset value of a fund is $20, and the fund is selling on an exchange for $18, the fund's price is said to be at a 10% discount to net asset value.

“If the same fund is selling for $22, the fund's price is said to be at a 10% premium to its net asset value.”

Also, we find out that our CEF income flow is usually (but not always) taxable to the investor.

If you are retired or soon will be, you do need to extend your understanding of investments to CEFs—and also to MLPs (managed limited partnerships) preferred stocks, and REITs, among other alternatives to common stocks and being a landlord. Dividend Detective is a good site to visit first, but so is Dividend Yield Hunter.

Also, don’t overlook Dividend Investor and Warren Buffett’s negative view of stocks that pay dividends.