Chapter 3: Closed-end Funds

Although most investors know about mutual funds and exchange-traded funds (ETFs), they are less likely to be familiar with closed-end funds (CEFs). CEFs are a useful investing tool that enables you to tap into an array of investments in a cost-effective and diversified way. They also have niche appeal, especially for investors interested in high-yield bonds, preferred shares, small-cap stocks, and emerging market bonds and stocks. The growth of ETFs in these niches and other areas poses a threat to the long-term viability of CEFs and the dominance of mutual funds as the pooled investment of choice for retail investors. Chapters 1 and 2 focused on mutual funds and ETFs, respectively. Now it’s time to examine CEFs.