Direxion Daily Gold Miners Bull 2X (NUGT)

[DrContango]

ETFs vs CEFs vs Mutual Funds

Perhaps these distinctions are the source of confusion amongst those loudly protesting the contributions of Stingray and myself. I think that the protestors are confusing ETFs with CEFs to some degree.

There is NO dilution with ETFs. They are designed to trade at NAV (net asset value). Creation and redemption of units arbitrage the market price back to NAV or IV (intrinsic value). Because of this arbitrage, very rare ETPs trade at a premium. One ETP that trades at a premium is TVIX, an ETN, not an ETF.

ETFs are similar to OPEN ended mutual funds in that new units are created as needed to maintain the price at NAV. They are dissimilar in that ETFs have lower mgmt fees and are sold on the open market. They sell at market price, but that market price, as I have explained, is constantly arbitraged back to intrinsic value. MFs, on the other hand, can only be sold at the end of the trading trade and always trade at NAV.

CEFs, or closed ended MFs, have a fixed number of shares and are offered initially thru an IPO. They generally trade close to NAV but it a particular fund is outperforming the general market or segment, there will be increased demand to purchase a fixed supply of shares. This results in a market divergence from NAV and the fund will trade at a premium. A poorly performing CEF might have decreased demand and trade at a discount to NAV.

Please review the following videos:

second video:
MorningstarEducation

and a review from bankrate.com
3 fund types

Good luck all! Knowledge is power. Please stop posting malarkey!