Almost all the mutual funds or open-end funds , which offer their holders the right to cash in their shared at their shares at each day's valuation of the portfolio , have a corresponding machinery for selling new shares . By this means most of them have grown in size over the years .
The closes-end companies , nearly all of which were organised a long time ago , have a fixed capital structure and thus have diminished in relative dollar importance . Open-end companies are being sold by many thousands of energetic and persuasive salesmen , the closed-end shares have no one especially interested in distributing them .
Consequently it has been possible to sell most mutual funds to the public at a fixed premium of about 9% above net asset value to cover salesmen's commissions ,etc . While the majority of close-end shares have been consistently obtainable at less than their asset value . This price discount has varied among individual companies and the average discount for the group as a whole has also varied from the date to another .
It does not take much shrewdness to suspect that the lower relative price for closed-end as against open-end shares has very little to do with the difference in the overall investment results between the two groups . If you want to put money in investment funds , buy a group closed-end shares at a discount of say 10% or 15% from asset value instead of paying a premium of about 9% above asset value for shares of an open-end company .
Assuming that the future dividends and changes in asset values continue to be about the same for the two groups , you will thus obtain about one-fifth more for your money from the closed-end shares .
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