Open to closed-end funds

Little-known investments worth a look, adviser says

Last Update: 6:29 PM ET Aug 5, 2005

BOSTON (MarketWatch) -- Closed-end funds offer an opportunity to buy stocks and fixed-income securities on sale, but Scott Schultz of Schultz Investment Advisors in Williamston, Mich. warns that not every issue is a bargain.

During a Personal MarketWatch interview with senior columnist Chuck Jaffe, Schultz noted that it's crucial for an investor to spot those bargains that are likely to pay off by converting a discounted price into a big gain. Listen to interview with Schultz.

With equity funds, Schultz said he likes funds like Boulder Growth and Income (BIF : boulder growth & income fd) because it allows an investor to "buy Warren Buffett at 85 cents on the dollar." On fixed-income funds, for example, he noted that every 12% discount to net-asset value adds roughly 1% to the investment's cash flow.

On that basis alone, Schultz said he would only look at floating rate income funds trading at a discount. Schultz doesn't believe interest rates are done rising, and would prefer not to own many forms of fixed-income funds, but noted that the discount - and the increased return it can bring - should ease the minds of some investors.

In discussing two funds that specialize in India, Schultz noted that the nation is "where China was five to seven years ago," and noted that it looks like a buy, since "I'd rather be early to the dance than late for the exit."

Schultz discussed the following closed-end funds, in order of appearance: John Hancock Financial Trends (JHFT), Adams Express (ADX : The Adams Express Company), Petroleum & Resources Corp. (PEO) ; Cohen & Steers Select Utility (UTF) ; Boulder Growth & Income (BIF), India Fund (IFN), Morgan Stanley India Investment Fund (IIF), John Nuveen Quality Income Preferred 2 (JPS), First Trust Four Corners Senior Floating Rate Income (FCM) and John Nuveen Floating Rate Fund (JFR) .