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 »
In the published common stock portfolio modeling the Continuous Full Investment portfolio models were included to function as a control to allow objective comparisons with the market timing models.
Although intended as a control, allowing demonstration of the validity of the timing technique, the Continuous Models have significantly outperformed the broadly based popularized market averages. The reasons for this superior performance are twofold. First, the rigid requirements for stocks to qualify for the Master List results in the stocks comprising the Continuous Models to be of usually superior fundamental quality, thereby giving the group an upward bias relative to the overall market. Second, the Continuous Models change positions in a gradual, relatively slow process in which new positions are selected that are among the most discounted (low-priced relative to the others) on the list. In effect, a rotational process adds those that have become more discounted and deletes those less discounted. Read the rest of this entry »
Two things must be kept in mind when establishing a long position in this kind of hedge. First, since Treasury bond futures contractsrepresent face value of $100,000 worth of Treasury bonds, the investor will want to go long approximately $100,000 worth of closed-end bondfunds. When it comes to trading closed-end bond funds, I do not recommend buying more than 2000 or 3000 shares of a single fund for a short-term trade. That is why we would go long several different closed-end funds, representing positions of from $31,000 to $34,000 and amounting to approximately $100,000. That $100,000 long position offset the short position of 1 September U.S. Treasury bond futures contract at 100.18, priced at a 7.943 yield.
On February 10, 1978, with the Dow Jones Bond Average down to 89.79, two significant changes had taken place since we established our theoretical long and short positions: (1) The long positions in the bond funds had become profitable, and (2) so had the short position in the Treasury bond futures contract. For example, JHS was selling at 175/8, up from 167A; DBF was up to 165/8 from 161/2; and PAI had gone from 135/8 to 1334. The net asset values of all three funds had declined but the discounts, as predicted, narrowed more than the decline in net asset values, resulting in the profits. Read the rest of this entry »
Greed is one of the most difficult sins to manage because it is always there. We invest to make money, and every promising investment raises the possibility of making a significant amount of money. We wouldn’t be human if part of us didn’t dream a bit about what might be. Good investors, though, keep that part of themselves in a controlled, isolated environment. If you are particularly vulnerable to the sin of greed, you’ll do likewise. Specifically, you’ll do some or all of the following:
- Invest slowly, knowledgably, and logically. Speed, ignorance, and reflex are the greedy investor’s enemies. Force yourself to move relatively slowly before making an investing decision, even when you’re certain that even a moment’s delay could cost you thousands. In the vast majority of cases, delaying your decision for a short period of time won’t hurt. In most instances, it helps because it gives you a bigger window of time in which you can think, reflect, learn, and talk about an investment. Greed preys on people who just react. When I say invest knowledgably, I mean do your homework. Learn about the fund’s or stock’s performance historically. Compare the fund or stock to the appropriate index or benchmark. Read as many reports as you can related to the investment. Don’t worry that your delay makes you spend an extra 50 cents a share because in the long run it won’t make a difference. Finally, logical investing means reasoning out your investment decision. When you hear a great tip or read something that makes you believe you’ve found a great fund that will make you millions, step back and write down the logical steps that have led you to this conclusion. Specifically:
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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 »
Certain types of investing seem to trigger anger in certain investors, and if you’re vulnerable to this sin, you should do everything possible to avoid these types. Specifically, don’t:
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SEEK HIGHLY VOLATILE, MICROCAP STOCK INVESTMENTS
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Some investors experience significant losses but take counterproductive actions in the wake of these losses. Rather than becoming aware of how their sins created their investing woes, they allow sloth and pride to cloud their vision, shielding them from the truth about the mistakes they have made. Read the rest of this entry »
Japan - funds analogous to investment trusts existed in Japan in 1937 in the form of investors’ associations, which, like the UK’s Foreign & Colonial Company’s original investment trust, faced challenges of legality and were dissolved in 1940, to be replaced in 1941 by undertakings that, modelled on the UK’s unit trust, found legal support. Post-war confusion led to these funds becoming closed to new investment in August 1945 and final dissolution in February 1950. Read the rest of this entry »
The investment management of a mutual fund’s assets is subject to compliance with the aims and policies stated in the prospectus (or equivalent offering document or explanatory memorandum) and to limitations imposed by regulations or, if more constraining, by the terms of the fund’s constituting deed or instrument of incorporation. This is the case if the investment management is carried out by the fund’s own sponsoring manager or management company, or by a third party appointed under contract to be portfolio manager or investment adviser.
Investors must be protected from unexpected and undesired changes in the purpose and practices of their chosen investment vehicle. Regulations therefore impose both a fiduciary responsibility and prescriptive rules on the operators of mutual funds to ensure there are no unauthorised or imprudent dealings.
Normally, investment is restricted to transferable securities that are listed on a recognised stock exchange, and, for funds that are to be marketed to the general public, investment in gold, oil, sugar and other physical commodities is generally not permitted but investment in property may be. The regulations usually reflect the general principles of collective investment, which are that the fund and its management should have the following characteristics: Read the rest of this entry »
