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To: Dolomight who wrote (17057)	10/11/2001 5:00:31 PM
From: Bernie Goldberg	Read Replies (1) of 18931

Hi, NAV stands for Net Asset Value. When you look at the Mutual Fund Page in your newspaper, all of the prices you see there are Net Asset Values. What a mutual fund does at the end of every business day is to determine the total value of everything they own. They then divide that number by the number of shares that are outstanding. This is how the the NAV of each share of the fund is determined. There are two kinds of Mutual Funds. Open Ended and Closed Ended. ACG is a Close Ended fund. A CEF is generally started with a fixed amount of $$ and a fixed amount of shares. For example: $100,000,000 and 10 million shares. With these starting numbers the NAV of the CEF is $10. The fund manager has 100 million dollars in cash to start out with. If it is a bond fund like ACG he goes out to the market and buys bonds. Let's pretend it is day one and he buys 100 million dollars worth of bonds. On day one the NAV of the fund is $10. On day two Dolomight hears about the new bond fund and wants to buy 100 shares. He wants to get in at $10 but none of the share holders wants to sell since the fund is so new or perhaps any other reason you can think of. You have to realize that with a CEF there are no new shares issued. You really want to get into this fund so you offer $11 at the market. CEFs are bought and sold just like stocks even though they are mutual funds. Bernie is one of the shareholders and sees your offer of $11. He says to himself. Gee! 10% in one day is not to shabby. Bernie decides to sell you 100 shares at $11 each for a net profit of $100. The price of this fund is now $11 per share. Let us also assume that on day 2 the world bond market crashes and the price of all the bonds in fund decrease in value by 10%. The NAV of the fund is now $9 but the price of the fund is $11. This represents a premium of 22%. Now I would like to pose a question to you. Would you be willing to buy dollar bills from me at the price of $1.22 each? I don't think so! Bear in mind that the exact opposite could and does happen every day and there are CEFs selling at a discount to NAV. The only time NAV comes into the calculation is with CEFs. the reason for this is that there is usually a discrepancy between the market price and the NAV. I like to look at CEFs that are selling at a discount somewheres between 10-20%. Once the discount starts getting much higher than that there is usually some serious problems in the area covered by the fund. There are some very good sites on the web that cover Closed End Funds. Try site-by-site.com If you want or need more than this one provides. Using google just type closed end funds. Here is a difinition from Forbes:Closed-end fund An investment company that sells shares like any other corporation and usually does not redeem its shares. A publicly traded fund sold on stock exchanges or over the counter that may trade above or below its net asset value. Hope this helps Bernie After typing all of this I just thought of a shorter answer. You walk into a store to buy a sweater. Your reason for buying the sweater is that winter is coming and you want to keep warm. On the counter you see two identical sweaters. One is on sale for $11 and the other is on sale for $9. The reason for the purchase of the sweater is warmth. The reason for the purchase of a CEF is usually income. Which sweater would you buy? Another unasked question you had referred to your "base". IMO Bond funds don't make a very good "base" for an investing pyramid. I believe you would be better off starting you pyramid with a strong, financially secure company.

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