Still want to invest in a closed-end fund? Follow these steps to size up a fund and get the best deal:

• Scan the horizon. Once you decide what kind of fund to add to your portfolio (U.S. stock, emerging markets, etc.), check out FiLife's growing universe of closed-end funds or look at Morningstar's directory here.
• Review the discount. The bigger the gap between a fund’s share price and NAV, the more likely it will narrow over time and provide you with a bonus. To evaluate the current gap, ask for the fund’s average one-year discount since its start. Then compare it to the fund's current discount.

You can generally assume that the fund’s discount eventually will migrate back to its historical average. For example, if a fund’s historical average discount is -7% but it is now trading at a -12% discount, you can expect the fund will return to its historical 7% average—and you’ll wind up pocketing the difference.

• Size up performance. The best measure of a closed-end fund's return is its performance over time—plus the effect on performance of the fund’s distributions. Also, the longer the fund has been in existence, with the same manager, the better. We think a fund should have at least five years of performance before you invest in it.
• Mind the debt. Beware of closed-end funds with more than 40% of debt to total assets. Such a debt level usually means the fund’s manager is using leverage to boost the income yield paid to investors, which makes the fund riskier.
• Scope your expenses. To invest in a closed-end fund, you’ll have to pay a commission on trades as well as fund expenses and high annual management fees that range from 1% to 2%. To hold costs down, look for closed-end funds with low expenses and fees, and consider trading shares through a discount brokerage.
• Check the yield. Closed-end funds tend to generate more income than open-end funds. When considering yield-producing funds, look for an annual yield that’s a couple of percentage points over that offered by U.S. Treasuries. Or look for a fund that has a discount of over 10%, unless it's a low-risk bond fund. Just be sure the high discount isn’t the result of capital distributions or a one-time payout.
• Mind your taxes. A high percentage of closed-end funds invest in bonds and preferred stocks to provide investors with higher yields than common stocks. Remember, in taxable accounts, this yield will be taxed as income, not the lower dividend tax rate.
• Skip IPOs. Buying shares of a closed-end fund just when they’re offered through an initial public offering (IPO) comes with big risks. That’s because the fund’s discount—or gap between share price and NAV—typically widens in the months following an IPO.
• Size up the manager. See how long the fund’s manager has been in place. The longer the better if the fund has delivered above-average returns.
• Compare the fund. See how the closed-end fund you’re considering stacks up against a similar open-end or exchange-traded fund. Be sure to compare performance, fees and expenses.