SOURCE: Author Scott T. Schultz

Author Scott T. Schultz

April 11, 2012 13:53 ET

'Guide to Closed-End Funds' Explains Little-Known Investment Option

NAPLES, FL--(Marketwire - Apr 11, 2012) - Scott T. Schultz's new book, "Scott Schultz's Guide to Closed-End Funds,", explores and explains a stock market option most average investors are not aware of.

Brokers don't tell clients about closed-end funds for several reasons, says Schultz, ranked the No. 1 Separate Account Money Manager for three consecutive years by USA Today. He says he earned that national honor by relying almost solely on limited-issue stocks. Because they're available only in finite numbers -- hence the name "closed end" -- and because watchful brokers can find them at discounted prices, they're a better bet as an investment for those who are willing to sit on them awhile.

Why is the American public so in the dark about closed-end funds? Schultz' book, the first written on the topic in more than 20 years, explains:

  • Brokers can't generate a lot of commissions from them. Brokers move open-ended funds quickly because they earn a commission with each transaction. It's easy money for them, Schultz says. Closed-end funds require a longer term investment strategy, so brokers who want to get rich quick won't use them.
  • They require more effort from the broker, who has to work to find the "sales." One advantage of closed-end funds is that they can sometimes be purchased at a discount, so the investor starts off ahead of open-end investors who are paying full price for stocks, Schultz says. Even if the fund never gets back up to its full value, any increase is a gain. But the broker has to be willing to work to find good, discounted investments and wait them out.
  • Closed-end funds are boring! For many brokers, it's just plain fun to trade stocks in products and initiatives with an exciting ring to them. These brokers are constantly trading stocks -- and generating transaction fees, lawyer and underwriting fees -- because that's what they like to do. Closed-end funds require thoughtful research before buying, and patience as both the broker and investor wait for the bid price to increase.

About Scott T. Schultz

Scott T. Schultz will be a featured speaker at the Capital Link Closed-End Fund and Global ETF Forum in New York City on April 25. Schultz was ranked the nation's No. 1 Separate Account Money Manager by USA Today for three consecutive years using GIPS verified/audited performance numbers supplied by Morningstar, Inc.

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