How Closed-End Funds Work

With so many different investments to choose from, it can be hard to know all of them. But with some little-known investments like closed-end funds, the opportunity comes from most people's complete unfamiliarity with them.

In the following video, Dan Caplinger, The Motley Fool's director of investment planning, looks at how closed-end funds work. Dan notes that unlike regular mutual funds, closed-end funds have mixed numbers of shares, allowing them to trade at discounts to the value of their underlying assets from time to time. Dan explains how well-known managers Franklin Templeton , Eaton Vance , and AllianceBernstein , as well as PIMCO and Nuveen, use closed-end funds to ensure a solid base of assets under management without worrying about redemptions. Dan recommends looking at liquidity and fees in order to separate out the best closed-end funds from the rest.