The international investment landscape is constantly changing, against a back-drop of social, political and economic unrest. The evolutionary investment market is also complicated further by the relationship between developed and emerging economies, as the latter continue to develop and offer alternative options for individuals with disposable income who are in search of a viable return.
Despite this, there are some investment options that have remained enduringly popular for generations. Take closed-ended funds, for example, which are collective investment schemes that have a fixed number of shares that are not redeemable from the fund. This is the type of structure that you will find in an investment trust, while it also reflects the original design of the typical mutual fund.
The Key Advantages of Close-ended Funds
With this in mind, what are the key benefits of close-ended funds? Consider the following: –
- Knowledge and Understanding
Fundamentally, close-ended funds have far less variables than alternative investment vehicles. This is because they have a fixed number of shares, and this will not change regardless of external economic factors such as supply and demand. There are also stringent guidelines in terms of trading, as these shares can only be purchased and sold in the financial marketplace. The consequence of this is that close-ended funds are far easier to understand, especially for less experienced or novice investors who are looking to develop a reliable and high performance portfolio.
- Access Flexible Trading Hours and Options
While close-ended funds may be restrictive in some respects, however, they offer flexibility in others. Close-ended fund shares can be traded at any time during market opening hours, for example, whereas those associated with open-ended funds must be purchased and sold at a time that has been predetermined by managers. Given the real-time fluctuations that often impact on the financial market, this may help investors to operate more freely and maximise their returns over time.
- Benefit from Share Prices that Trade at a Discount to the Net Asset Value
As a general rule, share prices in a close-ended fund usually trade at a discount to the net asset value. This is in stark contrast to the shares in an open-ended fund, which typically trades at net asset value and may also be subject to significant sales charges in some instances. While there may be instances where some shares suffer from an unduly wide or narrow discount, this investment method at least enables individuals to highlight favourable options that offer them the most lucrative gains. This is particularly beneficial for less experienced investors, especially those who are willing to research the market and solicit expert opinion.