Pass on this ETF

Article Excerpt

Closed-end funds work with a fixed asset base invested in a portfolio of securities. The value of their assets rises and falls depending on how they invest. Their units trade like stocks, and most often on a stock exchange. They may trade above the per-unit value of the investments they hold—or, as brokers say, “at a premium” to their net asset value. However, for the most part, they trade at a discount. If the manager of a closed-end fund does a bad job, unitholders pay a double penalty: both the value of the fund’s assets falls, and the discount also widens. So it’s a mistake to invest in a closed-end fund simply because you like the area it focuses on, or because it’s available at a discount to asset value. You need to look at how wisely it picks stocks to invests in. There are now ETFs that also invest in a portfolio of closed-end funds. One such ETF is the INVESCO CEF INCOME…

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