I have followed CE funds for a long time and think it is dubious that buying when the discount is large and selling when it narrows will produce a better return than the market over substantial periods of time. Probably the reason Malkiel no longer recommends the strategy is that this was a popular idea some years ago that didn't pan out - like China, EM, others. CE funds are basically sucker products sold to retail investors when enthusiasm for a sector is high. They have high expense ratios, often hidden leverage and whatever the discounts are today they can always be wider tomorrow since the size of the discount is essentially unpredictable. As with most, maybe all, market outperformance there is a luck component and a measuring component - that a lot depends on when you start and stop the measurement. A fund of closed end funds seems especially unlikely to outperform over time since there are two layers of fees so you are likely paying a total fee of around 3-4%. Making up that fee in outperformance "alpha" is unlikely over substantial periods of time, i.e., when the luck and measurement components are x'd out.
Statistics: Posted by Jack56 — Sun Jul 21, 2024 12:47 pm — Replies 97 — Views 22579