- If you give away more money than you make, eventually you'll be broke.
- The same applies to closed-end funds, but fund managers and investors have powerful reasons to want to both pay and receive distributions that exceed the fund's ability to pay.
- Fortunately there are easy ways to spot it when this is happening, for investors willing to look for the right signs.
- We identify some "serial eroders": funds that consistently pay out more than they earn, thus eroding the fund's asset value and their shareholders' investments.
For further details see:
'Slip, Slidin Away' - What Happens To Funds That Over-Distribute Their Earnings