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Buying and Selling

In general, you will need to set up a brokerage account to buy closed-end funds. Some funds offer a direct purchase plan where an investor can purchase shares from a transfer agent without going through a broker. Most investors place their instructions with the assistance of a securities broker, or financial advisor, who transmits instructions to the exchange on which the closed-end fund trades. The broker also may offer guidance on how the fund fits into your overall planning. You can buy or sell closed-end funds through all types of brokerage firms, including full-service brokers, discount brokers and on-line (Internet) brokers. In each case, you pay your brokerage firm a commission for the services provided.

The procedures for buying or selling closed-end funds are the same as for buying or selling stocks. Your broker can quote you the current market price of the shares, determined by competitive bidding. You then decide whether you want to pay the prevailing price by submitting a market order or set your own price through a limit order.

The process, from the time you place the order until the confirmation comes back, can take just minutes. This is a major difference between transactions in closed-end fund shares and mutual fund shares:

  • With closed-end funds, you can control the timing of your orders. Through limit orders, you also can control the exact price you pay.

  • With mutual funds, you can't control the timing. All orders received during a business day are filled only at the end of that same day, and all transactions are based on the closing net asset value per share.



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