Boomers Stand to Inherit
TrillionsClosed-End Funds a Good Investment
Option
Baby boomers stand to inherit $10 trillion in the next few
years and women will get the bulk of it, according to a Cornell University
study, because they outlive men an average of seven years.
“Women already control 60 percent of the nation’s personal
wealth – they outnumber men and they are traditionally the shoppers,” says
financial expert Scott T. Schultz, author of Scott Schultz’s Guide to
Closed-End Funds (www.closedendfundguru.com).
“It’s sad that, despite the fact that nearly a third make
more money than their husbands and they’re starting businesses at twice the rate
men are, 38 percent of women ages 30 to 55 worry they’ll eventually live in
poverty because they can’t adequately save for retirement,” he says.
With the first of the boomers hitting 65 this year, the
nation will see an even greater number of retirement-aged women holding the
country’s purse strings.
“Many will inherit money and property from their parents
and/or their husbands, and many will live another 30 to 40 years,” Schultz says,
citing the Cornell study. “They’ll need to invest their money to ensure they
have enough to avoid that impoverished retirement they fear, but they – and the
nation – have lost confidence in the stock market; April 2011 saw the lowest
number of investors since 1999.”
What brokers don’t tell clients about, he says, is
closed-end funds. Schultz, ranked the No. 1 Separate Account Money Manager for
three consecutive years by USA Today, says he earned that national honor by
relying almost solely on these limited-issue stocks. Because they’re available
only in finite numbers and because watchful brokers can find them “on sale,”
they’re a better bet as an investment for those who are willing to sit on them
awhile.
Why is the American public so in the dark about closed-end
funds? Noting his book is the first written on the topic in more than 20 years,
Schultz says there are a few reasons:
• Brokers can’t generate a lot of commissions from
them. Brokers move open-ended funds quickly because they earn a
commission with each transaction. It’s easy money for them, Schultz says.
Closed-end funds require a longer term investment strategy, so brokers who want
to get rich quick won’t use them.
• They require more effort from the broker, who has
to work to find the “sales.” One advantage of closed-end funds is that
they can sometimes be purchased at a discount, so the investor starts off ahead
of open-end investors who are paying full price for stocks, Schultz says. Even
if the fund never gets back up to its full value, any increase at all is a gain.
But the broker has to be willing to work to find the good investments with good
discounts. And then he or she has to be willing to sit on them.
• Closed-end funds are boring! For a lot of
brokers, it’s just plain fun to trade stocks in products and initiatives with an
exciting ring to them, whether it’s Facebook or a treasure-hunting ship. These
brokers are constantly trading stocks – and generating transaction feeds, lawyer
fees and underwriting fees every time – because that’s what they like to do.
Closed-end funds require thoughtful, sometimes tedious research before buying,
and then the patience of a saint as both the broker and the investor wait for
the bid price to increase.
About Scott T.
Schultz
Scott T. Schultz began his career in 1983 at E.F. Hutton and
was ranked the nation’s No. 1 Separate Account Money Manager by USA Today for
three consecutive years using GIPS verified/audited performance numbers supplied
by Morningstar, Inc. Schultz was a GOP nominee for U.S. Congress in 1988, and
met with Presidents Ronald Reagan and George H.W. Bush at the White House. He
graduated from Michigan State University with a degree in journalism.
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