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Tuesday, August 19, 2008

Mutual Funds and Closed-End Investment Funds

From The Hoss's Mouth


mutual funds and closed-end investment funds

Mutual funds and closed-end investment funds are the topics of today's Hoss Cents Free Financial Money Magazine post. The Hoss will provide you with detailed information you should know about these fund types. With this knowledge, you will be in a good position to handicap the various funds available.

Mutual Funds: A fund that continually issues shares or units to investors. The risk factor of mutual funds range from low to very high, and depend on what type of mutual fund you invest in. Government bond funds for example are less risky than equity mutual funds. Your profits come from a trifecta made up from earned interest, dividends and/or capital gains. In addition, when you decide to sell some of or all of your units ,you could have an additional capital gain. Of course, if you sell for less than you're paid, you will have a losing ticket (capital loss).

Banks, fund companies and investment firms all sell mutual funds. When you purchase or sell units or shares of a mutual fund you receive the "net asset value" (NAV). In other words, you receive the current value of the fund.

Any fees and/or expenses the fund pays are deducted from the fund's assets. This could consist of management fees, incentive fees, trailing commissions, operating expenses and/or administration fees.

You may also have to pay sales charges, switch fees, redemption charges, short-term trading fees, registered plan fees, and minimum account fees. The Hoss says, before you purchase any mutual fund, make sure you are aware of all the charges you will be responsible for.

Closed-End Investment Fund: These funds differ from mutual funds in that they do not continually issue units or shares to investors and these funds may trade on a stock exchange. Consequently, it can be difficult to buy or sell closed-end funds, particularly if they are not listed on an exchange, or if they are listed, they have low volume trading.

Like mutual funds, the risk depends on what type of fund the investor purchases.

NOTE: You will be charged a commission when buying or selling closed-end funds on an exchange.

Time for The Hoss to do a workout, so until next time...

Stay on track,

The Hoss

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