What are closed end municipal bond funds? These are closed end mutual funds which are traded in the same way that individual stocks are, and that invest primarily in municipal bonds of varying lengths and from different municipal entities. These shares must be purchased through a broker so there is a commission which is charged, and this amount will vary depending on the specific broker that you choose to use. Closed end municipal bond funds do pay out dividends, and are usually looked at by investors as a form of an index fund. They are an investment company, and the management style used is active rather than passive. Investors in these funds have voting rights, and a board of directors is appointed to choose a portfolio manager and investment advisor for the fund activities and investment portfolio.
Closed end municipal bond funds are mutual funds, and this means that many investors pool their capital, which is managed collectively. Municipal bonds can be an ideal choice for many investors because they are a fixed income security, one that is backed by the issuing municipality. They are normally considered safer choices than stocks or some other investment types, but there are still risks involved. Shares in the fund are traded on open exchanges or over the counter, and these shares can split just like individual stocks can. The laws of supply and demand dictate the price for any of the closed end municipal bond funds, and this price is also affected by the market volatility at any given time.
Choosing closed end municipal bond funds instead of building a portfolio one stock at a time makes sense, because a mutual fund will allow you to combine your resources with those of many other investors, and the large amount of capital available will work to the benefit of all the investors involved. The fund manager or advisor will be the one to determine which municipal bonds are bought and sold, and will keep track of the cash reserves, portfolio holdings, bond maturities, and any applicable changes in the interest rates, as well as other fund activities and information. These funds may be a good choice for some, but they can also be a bad option for some investors, depending on the investment strategies being used and the overall investing goals.
Evaluating different possible closed end municipal bond funds should include comparing certain factors, because not all of these investment types are the same and some will have higher costs or lower returns than others do. You should look at all of the relevant information for each fund, and then decide which one fits best with your portfolio holdings and desired investing guidelines. Make sure you consider all of the expenses, and the commissions should also be examined closely. Look at the fund performance over the last few years, and evaluate each manager or advisor individually. Consider how long each has been with the fund, and whether the performance improved or declined since the manager took over the position.
