Hello Antagonist members,
Welcome to the monthly issue of our Blend Portfolio.
The positions I’m adding today not only offer a chance for profits, but they also protect your wealth and may even give you a tax advantage.
Here’s what we’ll cover:
The benefits of closed-end funds
Our 2 new positions
Review of other Blend Portfolio positions
The benefits of closed-end funds
Before I announce our new holdings, we first need to discuss a type of fund that may be new to you. Both positions are closed-end mutual fund trusts, which can offer significant advantages over the more well-known open-end versions.
What is a Closed-End Mutual Fund Trust?
Imagine two types of jars that hold money:
Open-End Jar (Open-End Funds): Every time someone wants to put money into this jar, a new space is created. Similarly, whenever someone wants to take their money out, that space disappears. So, the size of the jar can change daily based on how many people are putting in or taking out money.
Closed-End Jar (Closed-End Funds): This jar has a fixed size from the start. No new space is created or removed. If someone wants to put money in, they have to buy a spot from someone who’s already inside the jar. And if they want to exit, they need to sell their spot to another person. Similarly, closed-end funds have a set number of shares. The fund doesn’t keep issuing new shares or buy them back. Also, you transact with other investors, not directly with the fund. Investors trade with each other on the stock market, much like you’d trade Apple or Amazon shares.
Below are some advantages of closed-end mutual fund trusts:
Pricing Dynamics: Since the number of shares is fixed, supply and demand forces in the market determine the share price. This can lead to shares trading at a premium or discount to the fund’s net asset value (NAV). For savvy investors, this could mean buying assets at a discount. (For more on buying assets at a discount to their NAV, see this post)
Stable Capital Base: The fund manager doesn’t need to sell assets to meet redemption demands, which means he/she can focus on long-term strategies. It’s like having a captain who doesn’t need to keep changing course in stormy waters.
Income Distribution: Many closed-end funds aim for regular income distributions, which can be a boon for those looking for periodic returns.
As I mentioned above, both of our new Blend positions are closed-end funds. This structure gives us the chance to not only grow our wealth but to also protect it. Here’s how:
Our 2 new positions
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