Think Closed Mutual Funds are big winners? Think again.

The old theory of supply and demand tricks many investors into thinking a closed mutual fund is something they really want to get into. The supply of available shares is zero, so the demand is high. On the message boards of Morningstar.com, many investors post requests for "one-share gifts" of a certain closed fund, offering investors who own them a hefty sum in return. Once they have obtained one share, most funds allow them to put more money into it. But do you really want to do this?

"We've found that closed funds actually don't perform all that well," says Morningstar's director of fund analysis, Russ Kinnel. "The biggest reason is simply because the point at which it closes is that point at which it's had really strong returns, and you're kind of just buying at the top."
Managers often close funds because they have too much cash flowing in- and can't manage investing it all. Some closed funds have horrible 1, 3, 5, and 10 year returns. So if you really want to get in, do an analysis like you would on any mutual fund- and make sure it's worth the price.