Closed End Bond Fund

There is a broad range of stocks, bonds and other investment opportunities to invest your money into. While diversifying your portfolio is critical to investment strategies, it may also be difficult if you do not understand what is available. Each category of investments has a different level of risk and return rate. Deciphering the information so you can invest wisely is critical.

One type of investment that you may inquire about is a closed end bond fund. These types of funds can only be purchased through a broker. All trading that is associated with a closed end bond fund must be handled in second tier trading (through a broker) you can not initiate a purchase with the bond manager independently.

The bond is considered a closed end because there are a limited number of shares available. For instance, a bond can be created that will encompass 100,000 shares. At that point, no further shares can be issued. Unlike a stock or open end fund that can add shares at any time, once the number has been set on a closed end bond, which is the maximum amount it can ever offer.

The bond holder, once the shares are sold, will then invest the money raised into other stocks, generating money for the fund. The value of the closed end bond will increase based on the performance of the bond managers choices. There is some risk associated with closed end bonds, they often sell for less than what they are valued at, but there is also a great chance for wealth creation if the fund manager makes good investment choices. As with any type of investment, discuss with your personal broker what would be in your best interest for investing. Investments should be made to coincide with your direct goals, not just a generalized investment pattern.

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