Keeping Cash Ready at Hand

by David Jenyns on October 22, 2008

A repurchasing agreement between an investor and an open-ended company can, under some circumstances, act as a pool of cash from which the investor can draw funds when needed. Unfortunately, open-end companies have no guarantees like those of the Federal banks.

The method of computing the net asset value for redemption is exactly like that for computing net asset value to determine the offering price, with the exception that the selling commission, or load, is omitted. Thus, if net assets have a value of $10 million and one million shares are outstanding, the net asset value per share would be $10.

Investors have found that the assets of an industrial company, railroad, or public utility company as stated on the books are one matter, but it is an entirely different matter to attempt to realize that book value on the market.

Investment plan has been influenced in two ways by this unique feature.

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