Investing in Closed-End Funds: The Basics: Introduction
Description
This article is from the A Guide to Closed-End Funds (CEFs).
Investing in Closed-End Funds: The Basics: Introduction
If you've invested in stocks before, then investing in closed-end funds (CEFs) will be a breeze. CEFs trade on the exchanges exactly like stocks. We recommend you at least quickly skim through this document, just to familiarize yourself with some of the differences (for example, in general, most CEFs are much less liquid than stocks, you should consider placing limit orders rather than market orders).
If you've invested only in mutual funds before, especially no-load ones whose shares you buy directly from the fund company, investing in CEFs will be initially a little bit more work. The reason is that CEFs, unlike mutual funds, issue only a fixed number of shares. Accordingly, to buy shares in a CEF, you will have to find someone willing to sell those shares. Matching buyers and sellers, and the buy and sell transactions take place in an orderly manner in a market called a stock exchange (e.g., the New York Stock Exchange (NYSE) or the American Stock Exchange (AMEX)).
This document briefly reviews some of the preliminaries: selecting a broker, setting up a brokerage account, placing an order, and tracking your CEFs.
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