Funds Investing

In determining which specific closed-end fund provides the best buying opportunity, it might appear that the process is exceptionally simple: Just see which one is selling at the widest discount and buy it.

Unfortunately, the process is a bit more complicated. As previously discussed, there are valid reasons for discounts. There is also a wide variety of fund types: equity (stocks in general or in industrial sectors), bonds (different types, such as municipal, corporate, foreign, or U.S. government; all with varying maturities), convertible bonds (combining both bond and stock characteristics), specialty (confining interest to a specific country, a very narrow industry sector, venture capital, or specific private placements), dual-purpose (where the fund seeks both capital gains and income), or anything else that can generate public interest and enough sales to capitalize the fund. Read the rest of this entry »

The good news about this investing sin is that you have a number of ways to reduce its negative impact. Here are some steps you can take to reduce your gluttony and find a more healthy balance between active trading and watchful waiting:

A. Reserve 5 to 10 percent of your portfolio for aggressive trading.

Just as a diet isn’t designed to eliminate all food—or even all junky food—a good regimen for the investing glutton isn’t to cut trading entirely. For whatever reason, you enjoy and need the action of buying and selling. What you don’t need is for this need to eat away at your portfolio. Therefore, reserve a small percentage to feed this habit. If you only actively trade 100 shares instead of 1,000, you probably won’t do much damage.

Remember, though, that this 10 percent high-end percentage is absolute! Invariably, a time will come when the actively traded 10 percent will be performing well, and the inner glutton’s voice will say, “Don’t be a sucker; you’re a much better investor now than before; up the percentage to 20 percent?’ Do not heed this voice. It is the same voice the dieter hears after losing ten pounds, the voice that says, “Another slice of chocolate cake won’t hurt you? Read the rest of this entry »