Investing In Physical Gold Via a Gold Bullion ETF

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Buying a Gold Bullion ETF Allows One to Invest in Physical Gold

Gold Bullion ETF

In recent months the commodities market has seen it’s fair share of highs and lows. Gold in particular became victim to the Federal Reserve’s recent comments about tapering the stimulus. While many investors, agencies, and individuals are abandoning the gold ETF market, others see this as a great opportunity for long-term investments. Because of this, we wanted to bring you up to speed on what you can be possibly missing by not participating in buying a Gold Bullion ETF.

What is a Gold Bullion ETF?

So what exactly is a Gold Bullion ETF? Can’t you just buy gold from commodities? We’ll get into the differences between the two shortly, but for now the answer is yes. You could just buy gold from commodities, but the Gold Bullion ETF has a different structure that can greatly benefit those interested in this rare precious metal.

A Gold Bullion ETF tracks the current market price of gold as it trades, and reflects one of the most accurate prices of gold today. Buying or trading Gold Bullion ETF can be accomplished as easily as a traditional stock trade. You simply use the appointed symbol for the particular Gold Bullion ETF you would like to trade with and just place a buy or sell order as you would with any other stock. You can even purchase or sell this commodity via online brokers.

(Photo credit to: ETFTrends.com)

(Photo credit to: ETFTrends.com)

Gold Bullion ETFs don’t mean that you physically own pieces of gold. Don’t expect any deliveries of bars, rounds (coins), ingots, or plates to be delivered to your home. Instead Gold Bullion ETF reflects the current valuation of the amount of gold that particular ETF holds within their own warehouse spacing. Though it is a direct investment in gold, you don’t have to worry about investing in secret, secured storage areas for this sought out commodities. That will definitely help you avoid becoming a victim of some elaborate heist like in “The Italian Job.”

How Does Gold Bullion ETF Differ From Gold ETF?

There are many ways Gold Bullion ETF differ from trading gold ETF derived from futures and options. The biggest one is with Gold Bullion ETF, there is no price decay. This occurs in other gold markets when upcoming contracts are much higher than the current one. Unfortunately as you trade in gold ETF markets, you are forced to pay the higher commodity ETF contract which can cause your investment to lose it’s value. The other major difference between the two is how the value is determined. Unlike gold traded through options, futures or commodities, Gold ETF prices are determined by the measured weight and quantity of gold the Gold Bullion ETF actually possesses, rather than the current market price.

Benefits of Trading Gold Bullion ETF

As we mentioned above, when trading Gold Bullion ETF you don’t have to worry about price decay. This provides you with a lot more potential to make money off of your investments. Though there are management fees associated with Gold Bullion ETF, they account for maybe 1% of gains accrued. Gold Bullion ETF can also serve as a great hedge investment when facing economic uncertainty and currency devaluation. Those who will benefit the most from trading Gold Bullion ETF are those who are looking for long-term investments. Especially right now, with so many selling their investments, you can stand to make quite a bit of money buying it low and waiting for the prices to rise.

(Photo Credit to: Forbes.com)

(Photo Credit to: Forbes.com)

One of the most popular Gold Bullion ETFs is SPDR Gold Trust ETF (GLD), though there are plenty of ones to choose from. A great site to use as reference would be the Definitive Gold Bullion ETF List. This provides you with current market prices from all of the available Gold Bullion ETF in addition to the other commodities available through exchange traded funds.

Gold Bullion ETF Wrap-Up

Like any investment, it’s important to understand what you are investing in and have taken the time to do the necessary amount of thorough research. For those of you looking to have physical position of gold, whether it’s gold bullion bars, coins, plates or ingots, should directly contact a dealer than can delivery physical gold bullion. Just remember, if this is the road you choose to pursue you must make sure you have the necessary space and security to store your investment. If you are simply looking to own an amount that a particular company stores and holds, trading Gold Bullion ETF would be a perfect investment for you. They hold many advantages over other gold investments you can make, and can greatly benefit you as a long-term investment. Make sure you take the time to identify which Gold Bullion ETF or any type of gold investment is right for you. Never make impulsive decisions while trading, as it could be the fastest way to lose thousands.

So what do you think? Are Gold Bullion ETF the right market for you? Or are you looking to physically own gold?

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How To Profit From The European Economic Recovery

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Why It Is Time To Invest In The European Economic Recovery

European Economic RecoveryWith a European economic recovery on the horizon, there are many investment opportunities presenting themselves to value investors.  Europe’s economy, which is really an amalgam of the two dozen or so countries that make up Europe, has been mired in recession for the better part of the past two years and general economic sluggishness since the 2008/2009 economic crisis.   During the summer of 2013, there have been indications that Europe’s long economic slump is ending, and a European economic recovery is taking hold.

Many economists and market watchers expect the European economic recovery to sustain itself through 2014 and beyond, which presents a number of value-oriented investment opportunities.  European stock markets, on average, are trading at lower price earnings levels than United States stock markets.  Investor sentiment has been overwhelmingly negative in recent years regarding European stocks.  Since stock prices and stock price discovery are affected in a large way by investor sentiment, many European stocks are trading at discounts to their normalize price earnings value.  With European economies starting to grow again and the economic growth expected to continue, European companies should be able to increase their earnings in coming years.  It is likely that stock valuations in Europe will increase as earnings increase.

How To Invest In and Profit From European Economic Recovery

European Economic Recovery Investments
With European stocks trading at a discount to their normalized earnings, there are a number of ways to invest and profit from the European economic recovery.  Many of the top European companies have stocks that trade on United States stock exchanges via American Depositary Receipts (ADRs), which are essentially indirect holdings of a foreign company’s stock.  Many other European companies have stocks that trade in the United States on otcmarkets.com (Pink Sheets) trading platform.

Identifying the European stocks that can be purchased in the United States and are trading at a discount to normalized earnings is a good way to position an investment portfolio to profit from the European economic recovery.  As the European economies recover and profits normalize (which means they return to the normal trend that was in place before the economic slump), it is a reasonable to assume that buyers will be drawn in and bid up the shares of many European stocks.  Of course, the key to successfully implementing this investment strategy is to get in early and ride the price of European shares higher.  This strategy could also be used by medium term traders that are looking to scalp some profits from the European economic recovery.

In addition to stocks, there are also a number of exchange traded funds (ETFs), exchange traded notes (ETNs), mutual funds that are focused on Europe, which can be used to either invest in or scalp profits from the European economic recovery.

European Economic Recovery Investment Ideas

Investing In The European Economic Recovery
Whether one is a long-term investor or a medium-term trader, there are a number of investment ideas that may work as the European economic recovery gains strength and takes hold.

European Financial Stocks – Just as financial stocks in the United States have outperformed the overall stock market during the economic recovery, select beaten down European financial stocks that do not carry a great deal of debt burden may provide above average upside during the European economic recovery.

European Industrial Stocks – Europe’s manufacturing index is, for the first time in years, providing readings that indicate an expansion is occurring in the European industrial sector.  It is not unreasonable to assume that some of the European industrial stocks that have been hit hard by the slowdown in Europe will recovery nicely as Europe’s economy recovers.

Publicly Traded United States Based Companies That Have Large Exposure To Europe – It wasn’t long ago that companies based in the United States that had exposure to European economies where shunned by United States based stock analysts and investors.  However, with Europe’s economies on the cusp of an economic recovery, many of these same companies are the ones that analysts and investors may want to take a look at to reap the benefits of an economic recovery in Europe.  These include companies such as Newmont Mining (NYSE:  NEM), which generates over 70% of its revenue from Europe, Carnival Corporation (NYSE:  CCL), which generates approximately 35% of its revenue from Europe, Priceline.com (NASDAQ:  PCLN) which generates in the neighborhood of 60% of its revenue from Europe, and Gilead Sciences (NASDAQ:  GILD) which generates approximately 30% of its revenue from Europe.

European Funds – There are a number of ETFs, ETNs, mutual funds that have their investment focus exclusively on Europe.  Funds that are primarily invested in European financial and industrial companies might outperform others, as Europe’s economies recover.  Funds that focus on middle and small capitalization European shares may be big winners, if the economic recovery in Europe is a lasting one, since smaller companies often outperform larger companies in the early years of an economic recovery.  Large capitalization European stocks should also do well as the recovery takes hold, especially as the recovery matures.

  • Vanguard FTSE Europe ETF (NYSE:  VGK) – VGK tracks the performance of the FTSE Developed Europe Index, which is comprised of approximately 500 stocks of companies located in seventeen European countries, with the focused on core European countries.
  • SPDR S&P Emerging Europe (NYSE:  GUR) – GUR tracks the performance of the S&P European Emerging Capped BMI Index.  Its focus is on companies doing business in emerging European markets that are on the periphery of Europe.
  • WisdomTree Europe SmallCap Dividend (NYSE:  DFE) – DFE tracks the performance of the WisdomTree Europe SmallCap Dividend Index.  The fund is comprised of small capitalization dividend-paying European companies.

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ETFs For Dummies

ETFs For Dummies

While exchange traded funds have been available for quite some time, it still seems to be partially shrouded in mystery. More recently, ETFs have become a popular means of gaining exposure to broad and niche markets without any complications or expensive fees. To give you a basic idea, in 2001 ETFs held $83 billion in assets. Fast forward eleven years to 2012, where ETF held assets was equivalent to almost $1.2 trillion. There are a variety of reasons why investors choose exchange traded funds over mutual funds or stock trades. For those of you who are still new to the world of ETFs, read on to learn ETF basics, the benefits, and the downsides of trading these semi-understood options. From there, you can take it upon yourself to decide whether or not you’d like to start trading ETFs, easily diversifying your portfolio.

First things first, what exactly is an exchange traded fund?

What Is an ETF?

To put it in the most simple of terms, exchange traded funds are investments that trade openly on the stock exchange. Consider the type of investment that would be produced by combining mutual funds with stock trades. Available in a variety of markets, ETFs can be seen as the best of both worlds as they perfect marry broad portfolio diversification with the ease of a single stock trade on the exchange. Their structure is very similar to mutual funds, as each share an investor purchases represents partial ownership of an underlying group of securities. ETFs were designed to track the performance of stock market indexes. The first ETF to emerge tracked the performance of the S&P 500. Exchange traded funds passively track specific indexes in an attempt to “become” the stock rather than “beat” it. Investors are also drawn to ETFs because they are also able to provide more investing options due to the broad range of indexes they encompass.

Now that you have a better idea of what ETFs are, let’s take a look at the basic similarities and differences between ETFs, mutual funds, and stock trades.

ETF Basics

When it trades like a stock and looks like a mutual fund, you can bet a year’s worth of management fees it’s an ETF. Adding a few exchange traded funds can definitely help you build a well diversified portfolio, but you need to make sure you understand the basic mechanics of this type of investment.

We’ll start with the most major difference between exchange traded funds and mutual funds, which would be how ETFs are bought and sold. Because ETFs trade like stocks, investors can purchase and sell shares regardless of the time of day. Mutual funds however, can only can only be bought or redeemed from the mutual fund company only after the close of trading. Another major difference between the two funds is the fact that there are no sales charges for exchange traded funds, though sometimes they do offer low management fees similar to those you would find with low index funds.

Besides the similarities to stock trades mentioned above, ETFs also offer an assortment of flexible trading options. The two most common are stop orders, which assigns an exact price for ETF shares to be purchased and sold for. Additionally, you also have limit orders where there is a set maximum or minimum price at which you are willing to buy or sell ETF shares for.

Since you know how to tell the difference between the three investment types, let’s take a look at the benefits and risks that accompany exchange traded funds to see if it is really worth investing in.

ETFs for Dummies – Know the Risks and Rewards

An ETFs For Dummies tutorial wouldn’t be complete unless it covers the main risks associated with trading and investing in ETFs to help traders and investors to avoid the pitfalls associated with buying ETFs. The following are the main ETF risks:

  • ETF prospectuses should be read carefully to understand how ETFs derive their valuations and the risks associated with holding particular ETF securities.
  • Leveraged ETFs that try to capture a 200% or 300% move, based on their underlying assets, are generally not suitable for long term investment purposes. This is due their spotty track records at tracking underlying assets properly over long periods of time and the exaggerated exposure that they subject an investment portfolio to within a specific investment sector.
  • ETF securities that invest in futures contracts have the risk of losing value due to price decay, if the futures contracts that are purchased over time by the ETF are more expensive than the near term ones sold by the ETF, which could cause a loss of investment principal over time regardless of the performance of the underlying assets.

Of course, there are also rewards associated with investing in ETFs, and ETFs For Dummies is going to spell them out. ETFs can be particularly rewarding if used to invest in a stock market index, as their fees are considerably less than mutual funds, which increases the potential long term investment gains. ETFs can also be particularly useful when an investor is trying to make a targeted investment, as there are ETFs for a wide variety of investment scenarios. Leveraged ETFs can be useful to traders trying to capitalize and make the most money possible from an anticipated move in a market segment.

Exchange Traded Funds, Now You Know!

While this information is incredibly valuable for gaining an understanding of ETFs, you need to remember to treat them just as you would treat a typical investment. Never purchase anything until you do the necessary research. Make sure you understand exactly what you are investing in and not just simply go for the gusto to diversify your portfolio. Once you’ve done your homework you can determine what ETFs to invest in, and start reaping the benefits of a more tax efficient, transparent investment. Make sure you also use additional resources for any questions that haven’t been answered from this post. As always, good luck!

What are your thoughts about exchange traded funds? Are they worth it? What advice do you have for beginners?

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The Gold Outlook For 2013

Attempting to keep track of the gold outlook each week can make any queasy person running for the bathroom. It’s a constant tumble of some getting their hopes up with highs at closing while other are pulling clumps of hair out with closing lows. Now, everyone is wondering what the future of these precious metals holds for their owners. What can we expect though for the gold outlook the rest of this year? Can we expect a year of cheers? Or will the toupee industry be the new hot investment?

Gold in the News

gold outlookIt was only a few months ago, mid-May to be exact that everyone was asking the same question. Will gold really be able to recover from it’s latest fall? What’s causing this? Is there still a demand for gold? Compared to the past few years, the current gold price is unbelievably low. Some feel that mid-April’s decision to raise cash deposit requirements on gold and silver contracts was one of the key factors, but analysts are still unsure. What they seem to almost fully guarantee is the fact that there is still a high demand for the precious metal and it will begin to reflect in the forthcoming months.

Gold For This Week

Last week gold had a surprising positive start only to continue their downward spiral as the days progressed. It seems the depreciation of the Aussie and Canadian dollar against the US dollar was to blame for this drop. There are many variables that may affect gold and silver for this week coming up. So far the gold outlook is not a positive one. It seems that prices may further fall even if there are some exciting upward moments. Don’t start to cheer yet, they’re not expected to last. Another development that could lead to a further drop are the results of the FOMC meeting’s minutes and Bernanke’s speech. Depending on what the Fed’s future plans are, we just have to wait and see. As of right now, many speculate a Q3 taper.

Should I Invest in Gold? Is it Time to Buy Silver?

gold outlook 2

 

It’s always good to consider investing in gold when the prices tend to drop lower than normal. Most of those attracted to trading and purchasing gold was actually not the demand for the physical metal but instead as a long term investment. If you are looking to protect yourself from potential hyperinflation or sharp USD devaluations against other currencies gold could be the precious metal for you to invest in. Thankfully the only devaluation seen was between the Aussie and Canadian dollar.

Who Is Being Affected?gold outlook 2

Gold ETF

Recent months have shown the stock market on a rise, but with raised gold import taxes (India) and China’s slowly growing economy international demand can continue to suffer. Out of all exchanges, the ETF market is suffering the most from gold’s falling prices. More specifically the it would be SPDR Gold Shares, the ETF that follows this precious metal. At the beginning of this year the ETF’s price fell almost 14%. Even with ETF holdings year to date drops at 16.4% SPDR Gold rose in 2013’s first quarter to $2.01 billion. That is quite the difference from 2012’s Q1 revenues of only $330 million.

Gold Producers

The ETF market and gold contractors are not the only ones suffering from the dwindling gold prices. Producers like Primero Mining (NYSE: PPP) fell almost 11% (YTF). The fall in gold will most likely minimize the profit margin Primero is currently working with. Another big gold producer suffering is Goldcorp (NYSE: GG) who dropped 16% in Q1. For Goldcorp it wasn’t just gold’s minimal production that hurt them, as copper and silver production also played a major role. With high cash costs and near non-existent profit margins this year may be a difficult one for the precious metals.

Cash Out: Gold and Silver Wrap-Up

From the recent trends, it is not looking too promising for gold. For those considering investing in gold now hoping for a large return later on, don’t hope for a quick flip. If the gold and silver market does begin to rise, investors should snatch as many shares and contracts as possible. If we look at the ETF, if clients continue to drop they’ll have to repurchase the stocks. If this falling gold trend continues it’s likely more investors will abandon this ETF. Considering India’s tax import and China’s slow economic growth I think it will be some time before we see fruitful returns from gold and silver.

What do you think though? What is your gold outlook? Do you think the precious metals will start to rise again?

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Winklevoss Twins File For Bitcoin ETF

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Yes, you read that correctly. The Olympic rowers from Harvard are now making waves in the stock market. As they continue to jump from one venture to the next, they have been active in the Bitcoin market for the past few months. Now, it’s apparent they had bigger plans for Bitcoin; submitting a S-1 filing to the SEC late Monday for the Bitcoin ETF. They hope to enter the exchange transfer funds market with the latest craze in virtual currency. The announcement though was met with skepticism as Bitcoin’s past is filled with volatile highs and lows. While the Winklevoss twins await approval from the SEC let’s take a look at why so many of the market’s influencers are discrediting this launch.

Image via Julien M. Hekimian/Getty Images

Image via Julien M. Hekimian/Getty Images

Why is There So Much Backlash to the Bitcoin ETF?

There is a reason why so many investors and financial groups are staying away from Bitcoin and the Winklevoss’ plan. For one, while the Bitcoin network may not be controlled or managed by groups like the Federal Reserve, increasing regulation and the stability of the major markets still greatly influence the price of Bitcoin. Like most other commodities, when it is difficult to keep something in circulation the price will increase, and vice versa. Bitcoins are the same way, as the prices fluctuate on how many Bitcoins are in circulation and how easily it is to be mined.  Mining is the term for the creation of a Bitcoin. As mining has evolved, the cost and complexity of the processors required has increased.

In their S-1 filing, the Winklevoss twins state that the share price for Bitcoins in their Bitcoin ETF will be a fifth of a Bitcoin’s value. This means that for every five shares purchased, the Winklevoss twins have to purchase a Bitcoin. Furthermore, overall value for the shares will be determined through what they call a “Bitcoin blend.” For this the price will reflect the daily average of the share’s high point and low point which can be extremely risky for any investor. Did I mention that the twins also launched Math Based Asset Services, the company who will be managing the portfolio? Or how about the fact that they will also be “storing” all of the Bitcoin virtual currency on their own proprietary system? Of course they will be requesting a fee for storing your Bitcoin, though the transaction fee is still undisclosed at this point.

If you thought these points were the worst of it, continue reading. There are plenty of surprises still waiting for you to uncover!

Regulators Concerned With Bitcoin ETF

Any person who has exchanged Bitcoin knows about the certain risks involved. While the virtual currency has been around since 2009, it’s history and past use should definitely pose concern to market regulators. Besides the apprehension of a rapidly growing intangible currency, regulators are also concerned with the potential money laundering abuse that can occur through a Bitcoin ETF. Even before the twins filed with the SEC Bitcoin has seen it’s fair share of publicity though it was usually infamously rather than any substantial worth. It was only a few months ago that money service group Liberty Reserve was shut down being reported as one of the biggest money laundering services ever uncovered. What is really stopping a hacker from hijacking the exchange for money laundering down the road? The largest exchange service, Mt. Gox, even recently filed to be considered a money service business as an assurance to authorities that they are fine with being subjected to the same regulations more established currencies exchanges abide by.  What should be more disconcerting for all “potential investors” are the key points the twins address in their 74 page filing. For starters, they address that if bitcoins were ever outlawed in the future, your shares would also be considered illegal and could be sanctioned. They continue by clarifying that neither twin has any history managing or operating an investment vehicle and state that their experience could be “inadequate or unsuitable to manage the Trust.”-(Bloomberg News) Well, if that doesn’t make you feel much better about investing in Bitcoin I don’t know what will! Moving on they also point out that because the currency is fairly anonymous, investors with brokers must trust that they will be honest with any Bitcoin EFT trades they manage. Then of course they go on about the “blending” pricing method for a ridiculously volatile currency. Basically, they’re letting you know that you will always get the average of the high and low, while they are reaping the benefits from higher share amounts and transaction fees for storage. Plus, what is stopping a hacker from getting into the exchange and manipulating the Bitcoin price to extreme levels? Saving the best for last the Winklevoss twins also mention how the Bitcoin ETF share prices can drastically drop IF the cap on mining was lifted. I’m not sure how this filing is even still being entertained, as this is probably one of the riskiest markets to invest into. Just look at all of the provisions and the potential for disaster. It could do a complete 180 turn, but there is nothing promising that you will find success in this market.

Going back to the Winklevoss’ experience, by digging deeper into their background you can see this is just another one of their trends.

What Have the Winklevoss Twins Done in the Past

They definitely have been busy since attending Harvard with their adversary Mark Zuckerberg, the founder of Facebook, Inc. You are probably more than familiar with the conflict between the three, as the twins claim to have contributed key elements that led to the creation of Facebook. After receiving a small settlement, the twins began to hop from one venture to another. Their latest ventures include an e-Commerce site Hukkster and a money manager online community called SunZero. In April they had purchased 1% of all outstanding Bitcoins, which are currently valued at approximately $10 million.  From there they filed with the SEC late on Monday for an IPO of $20 million offering to exchange their holdings for shares. Their claim to the press is to make Bitcoin more mainstream using Bitcoin ETF to make it more cost efficient for people to purchase Bitcoins. As mentioned earlier, every five shares totals one full Bitcoin.

On a positive note, there are certain advantages Bitcoin can have if given the green light.

Bitcoin ETF Reshaping Currency

While Bitcoin has been used in the past for gambling, money laundering, and other illegal activities it holds an abundant amount of potential. If the Bitcoin ETF platform is approved, it will gain a multitude of exposure by the general public. Bitcoin holds all the necessary potential and skills to revolutionize payments, it just needs that initial spark. This can only happen if Bitcoin becomes widely used. Since being created by an anonymous hacker (going by the psuedonym “Satoshi Nakamoto”) Bitcoin’s use has definitely grown. There are many online websites that accept Bitcoin as easily as Paypal, including a few brick and mortar establishments accepting it.  Kickstarter even has a project titled “Life On Bitcoin,”  a documentary following a couple living in a rural community and only use Bitcoin for transactions. The anonymity and security that made Bitcoin so valuable also has its appeal although it works against the virtual currency in regards to the stock market.

Wrap-Up: What’s the Verdict on Bitcoin ETF?

As the SEC has yet to approve or deny the twins’ filing there are still many undisclosed details that would help brokers, traders, and groups alike make a more intelligent decision. Before making any decisions though, you need to conduct your own research as well. While digging for information consider this:  The Winklevoss twins are known for jumping from one investment to the other. In this case, it seems they are looking for a quick, lucrative way to increase their initial $10 million investment. How would they do so? By creating a lot of hype around a controversial currency, one that has the potential to be amazing. They’ll stand by it as advocates while profiting from the increase in value and the systems they’ve created to store the virtual currencies. If approved by the SEC, you need to make sure this investment is worth the risk. So far, evidence has shown this may be one IPO to ignore. We will have to wait and see what the SEC decides.

In the meantime, what are your thoughts? Do you think Bitcoin ETF can be successful? Or do you think this will lead to a lot of disappointed investors, brokers and financial groups? Let us know!

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CEF Connect Is The Source For Closed End Fund Information

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CEF Connect Provides Closed End Funds Information

CEF ConnectWhile closed-end funds (CEF) have garnered a lot interest from stock market participants in recent years, it is still a foreign concept to many. Those of you wondering what closed-end funds really are, and how they work will be happy to know that the Nuveen Investment Group has a website just for you. To understand the dynamics of closed-end funds visit the resourceful CEF Connect. In minutes you can start learning about closed-end funds basics, types, strategies and more. Unlike Nuveen’s own website, which offers a small section on CEF, CEF Connect is completely dedicated to the closed-end funds universe. Because of how difficult it can be to understand CEF at first glance, Nuveen created this in-depth web portal to educate the general investing public. With the help of CEF Connect, you can use this collection of priceless information to not only learn the basics, but also advanced strategies that can all be found in CEF Connect’s Education Center.

What Is A Closed-End Fund?

So, while you continue reading I will give you a brief overview of the type of information you can easily find on CEF Connect. Initially, you need to know what closed-end fund really means. For those of you readers that are income-conscious looking to accomplish a wide range of goals, you should definitely learn about closed-end funds. It’s especially attractive to those looking to accomplish long term total returns, higher income portfolio diversification, and even meet obligations with a quarterly or monthly cash flow.

How a Closed-End Fund Works

A CEF is a publicly traded investment group that trades in a variety of sectors including stocks and bonds. From there capital is raised through an initial public offering (IPO). Investing according to the objectives, the CEF shares and proceeds are dispersed. They were labeled as “closed” because once they reach the capital goal, there are usually no shares available from the sponsor and issuance of new shares is closed to investors. Following the IPO, all of the closed-end funds are listed on a national exchange like the New York Stock Exchange (NYSE). Its shares are then bought and sold in transactions with other investors, rather than with the sponsor company itself. Ultimately, the net asset value is not what determines the price, the market’s demand and supply do.

Possible CEF Benefits

I say possible because you know as well as I do, nothing is ever a “sure-thing” in stocks and investing. While CEF Connect lists out almost ten advantages, I’ll share five advantages that appealed to me the most. I was especially intrigued by the fact that there is a regular prescribed schedule for cash flow and distributions. Even though you still have to pay a brokerage commission, closed-end funds tend to have lower operating costs. Following low operating costs and brokerage fees, there are no annual 12b-1 trading fees. I also found it interesting that once the IPO phase has concluded there are no minimums. If someone wanted to just buy one share, there is nothing stopping them from doing so. Lastly, and most likely the most important benefit comes to your portfolio. Without the pressure of constantly investing or trading securities, you are able to take advantage of longer term and less liquid securities or markets.

Closed-End Fund Basic Concepts

The last sneak peek I will give you to CEF Connect’s site are their key concepts. One of the first basic concepts you need to understand in order to start investing with closed-end funds is the net asset value. CEF Connect does a great job visualizing this, giving you a formula to easily understand. Basically, you can determine the NAV by subtracting fund liabilities from fund assets and dividing the difference by outstanding shares. Discounts also play a role in closed-end fund jargon, referring to the percentage between the sale price and net asset value. From there, dividends, distributions, and performance complete the picture, by giving you a few options to receive your earnings. CEF connect also lets you know you what to expect in regards to taxes while also covering the percentage increase between share price and your total return on share price including distributions. Just by briefly explaining these points I feel dizzy, I definitely see why they made a resource site!

What Else CEF Connect Offers

Besides their amazing education center that explains CEF from start to finish, CEF Connect also has a Glossary and Frequently Asked Questions (FAQs) page that further explain Closed End Funds.

The CEF Connect website offers useful features for investors seeking to make investments in Closed End Funds.  It also provides fund pricing data and information about the structure of Closed End Funds for investors that are interested in learning more about specific Closed End Funds.

The CEF Connect Fund Screener provides investors the opportunity to find Closed End Funds that suit their investment needs.  Using the CEF Connect Fund Screener, a potential investor can sort by the major Closed End Fund Categories, including:  Tax-Free Income, Taxable Income, United States Equity, and Non-United States/Other.  The CEF Connect Fund Screener search can be further refined to search by fund sponsors and funds that either do or do not participate in leveraged investing.

The CEF Connect Fund Sorter allows users to sort Closed End Funds by:  Ticker, Fund Name, Strategy, Discount (to Net Asset Value).  The CEF Connect Fund Sorter is a useful tool to find Closed End Funds that fit into a desired investing strategy and to understand the current discount to Net Asset Value for Closed End Funds.

The CEF Connect Closed End Funds Internet portal is a powerful tool that is available to investors considering investing in Closed End Funds and investors invested in Closed End Funds.  Additional enhanced features are available to registered users of CEF Connect.

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