Hoping some of you fine people can help provide some clarity on one of the recommendations made towards the end of the book A Random Walk Down Wall Street. Basically the author makes the recommendation that if a discount of 10% or more in the price relative to the NAV exists on a closed end fund, then this would make it a more attractive buy than a similar open end index fund. Browsing through some emerging market closed end funds (the author makes a point that this sort of discount is more easily found in the international space) on my brokerage website, I can see several different funds selling at a 10% or greater discount. However when I look to the expense ratios on these funds, the majority are over 1% and many are over 1.5%. My questions is how would you decide when the discount more than makes up for this greatly increased ER, which is often 2-4X as high as similar ETFs and mutual funds in the open end space? At what point does the increased ER outweigh any benefit of buying at a discount relative to NAV? I feel like I have been conditioned to look at nothing but ER and when I see them this high I cringe, but I do not think the author would make this kind of recommendation if it did not have any merit so I want to hear some opinions.
TLDR ER is much higher on average close end fund, how do you decide when they are attractive in spite of this?
Submitted August 20, 2018 at 07:03AM by Shrewligi https://ift.tt/2vXedV6
