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Investing

Dual-purpose funds explained

Closed-end funds with a set return value for preferred shares.

Dual-purpose funds start out as closed-end funds, but they can be changed to open-end funds depending on what the shareholders decide. As a result, these funds are generally recommended for people who have some experience with mutual funds and investing to begin with. First, you’ll have to make sure that you buy shares in the closed-end, dual-purpose fund while they are still available on the market. Then, you will hold onto those funds until after the listed expiration date.

Dual-purpose funds have a specific expiration date that is set when they are formed. Therefore, you should make sure that you look at how far in advance that expiration date is before you buy into the mutual fund.

Since these funds start out as closed-end funds, there will not be new shares created until after the expiration date. This means that the price of the fund, and the amount of money that you will get as a return is entirely based on the performance of the stocks and bonds that your fund has invested in. Therefore, you should make sure that the fund you are going to invest in is being managed by somebody with a lot of investing experience.

When the dual-purpose fund reaches the expiration date, then there are a few choices that can be made at that point. First of all, there is a set amount of preferred shares – these are redeemed at the price that was agreed to at first. If you have a preferred share, then you’re going to get the price that you were quoted before the fund was put onto the market. After that, the rest of the shareholders will get to split what is left of the assets.

At this point, there are two choices. First, the shareholders can decide to just liquidate the fund, sell off all the shares and split the assets. Second, the shareholders can decide to keep the fund going – at which point, they will keep the fund open, but turn it into an open-end fund so that more people can buy shares. At this point, the amount of money that the fund is worth will be based both on the performance of its investments and on the number of people who are interested in purchasing shares.