Motivated by a question from Darrell
In a standard, garden variety, open-ended mutual fund, the fund manager issues new units whenever somebuddy wants to buy shares.
The manager may have to buy more stocks with these extra monies - at an inconvenient time ... like when stocks are overpriced.
Further, if the market tanks and Sam wants to redeem his mutual funds
(which he does via the fund company, not on the open market), the fund manager may have to sell stocks
to raise the monies necessary to accommodate Sam.
The value of a mutual fund unit, the Net Asset Value or NAV, is determined at the end of each day by the value of stocks owned by
the fund company, the company's cash reserve, its debt and the management expense ratio.
There are also Closed End Funds, or CEFs, where the number of shares is fixed ... and therefore limited.
CEFs, however, can be bought and sold like stocks and may have a price above or below the NAV.
Because their price depends upon the market forces of supply and demand
(remember that there are a limited number of shares), they tend to be more volatile than the NAV
... and they can be traded throughout the day.
These CEFs also have a NAV: the value of the stocks held divided by the (fixed) number of shares outstanding.
>Where did you learn all this?
Uh ... somebuddy asked me a question, but I knew nothing about CEFs and NAVs and had to surf the Net to find out what they were
>And now you know?
Well, I only know enough to generate a spreadsheet that downloads the CEF and the NAV and displays the percentage that the CEF price is below the NAV price.
That's the "discount", but the CEF may also trade at a premium to the NAV and ...
>Why not just show a picture of the spreadsheet?
Click the picture to download the spreadsheet.
You type in a Yahoo CEF symbol (like jps) and the associated NAV (like XjpsX) and click the button.
The daily closing CEF prices will be downloaded from Yahoo and saved, for the past year.
Then the end-of-day NAV prices will be downloaded.
Both are plotted as well as the discount (or premium) and ...
>A discount of 13.6%? That's high, isn't it?
How would I know?
However, here's some
with even higher discounts.
>You sure you know what you're doin' ?
No, but you can read all 'bout 'em here
and look at CEF data here and charts at