Everyone knows about traditional, open-end mutual funds. Yet when it comes to trading vehicles, what many don’t realize is that closed-end funds often offer better opportunities to profit than either open-end funds or ETFs. Because open-end funds always sell at their NAV (net asset value), you can never buy or sell them at a discount or premium to NAV. With closed-end funds, you can trade them at either a premium or a discount to their NAV.
This closed-end fund arbitrage opportunity gives investors a couple of distinct advantages, and this is why I prefer trading closed-end funds to open-end mutual funds. Let’s take a look at how this works.
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Here are 5 keys to trading closed-end funds.