Types of Closed-End Funds
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Types of Closed-End Funds
Sector funds
Some closed-end funds focus specifically on securities within a given sector. These are called sector funds. Sector funds try to take advantage of rising economic sectors while spreading risk across many companies within that sector. Examples of common investment sectors include banking, health care, and technology.
Things To Know
- Some funds focus on a given sector.
- Some funds focus on a given region.
- Some funds reflect a particular investment philosophy,
Regional funds
Other closed-end funds narrow their investments down to a particular region or country. These are called region or country funds. The goal of a country fund is usually to see large increases in capital over a period of several years. Emerging-markets funds invest in securities from developing nations. You should recognize that investments concentrated in a specific industry, sector, or geographical region are subject to a higher degree of market risk than other, more diversified, investments.
Some funds diversify
Diversified funds usually reflect a particular investment philosophy, depending on how their investments are spread among different types of stocks and/or bonds. Funds that invest in a mix of US and foreign securities are called global funds, while those that focus only on non-US investments are called international funds. Some global and international funds are built around a single theme, such as investing only in newly privatized companies.
Bond funds
Closed-end funds can also invest in bonds. Domestic bond funds are the most common type of closed-end fund. They invest in bonds issued by local and state governments. The goal of these funds is to provide tax-exempt income to their investors.
Closed-end funds allow investors to participate in a microcosm of a specific market with a relatively small cash outlay because the fund represents the market while the investor doesn’t actually have to buy each and every security represented in that market.