Although these funds come with more risk than, say, U.S. Treasurys, they also can provide decent yields.
"For fixed income funds, we're seeing a little better returns ... sometimes because they are at a discount, anywhere from 3% to 10% of NAV," said certified financial planner Robert Finley, principal at Virtue Asset Management in Chicago.For funds invested in equities, he said, discounts to NAV can appear in areas of the market that have been sold off and are now undervalued.
Additionally, these funds also may put their assets in less-liquid investments, such as very small companies, municipal bonds that aren't widely traded or emerging market securities. Closed-end funds are generally volatile, Finley said. "People should be aware that when the market pulls back or has a major move, these funds move more."