Nabors Industries(NBR) Message Board

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Gold/Mining/Energy : Nabors Industries(NBR)

NBR 51.63

-0.3%

3:59 PM EST

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To: Jim Lou who wrote (51)	3/26/1998 1:18:00 PM
From: Char	Read Replies (1) of 174

Jim Lou Jim Lou Jim Lou There are two type of funds, open end and closed end. Open end funds are the usual type of mutual funds you think of (for this example we are talking no load funds). You buy them from a mutual fund company. They get priced at market every night and when you want to sell, you sell them back to the company. The number of shares outstanding varies daily depending on how much money came into the fund or flowed out of the fund that day. Say the total of all the shares adds up to $10 million and there are 1 million shares out at the end of the day. That means every share is worth $10. If you sell your shares that day that is what you will receive. If $1 million comes into the fund the next day there will be $11 million in the fund and assuming the price of all the stocks did not change there will be 1.1 million shares in the fund and they will still be worth $10. Now this is where the difference in closed end funds comes in. Say the fund starts with the same $10 million and 1 million shares. There will never be any more shares issued and when you want to buy/sell shares, you buy/sell them on the stock exchanges just like a share of stock. The total value of all the shares in the fund divided by the 1 million shares sets the Net Asset Value (NAV) for the shares. Say the total value of all the stocks adds up to the same $10 million, then the NAV would be $10 per share. Since you are buying/selling to another individual the prices will vary from the NAV depending on what is currently being bid/offered for the shares. Closed end funds almost always sell at a premium or discount to the NAV. If the shares are selling at a 10% discount to NAV then you would pay $9 and own $10 worth of stock per share. If it was selling at a premium then you would pay over $10 but only receive $10 worth of stock. Personally I would never buy a fund that is selling at a premium to NAV. The current NAV can be found in the tables in Barron's each week. I would like to find a site online that lists the NAV but I haven't found one yet. Another difference is since the shares are traded on the stock exchanges, you can sell short just like shares of stock. This gives you the opportunity to sell short a country that you think is overpriced at the time. We have only been talking about country funds but there are also sector, bond, and income closed end funds. Again they are all listed in Barron's I hope this is written clearly enough to make sense. Dave

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