It is one of the biggest political initiatives since U.S. President Barack Obama took office. Today, the President lifted all restrictions on the ability of individuals to visit relatives in Cuba, as well as to send them remittances. He is also apparently going to allow telecommunications companies to provide cell and television service to people on the island. The move represents a significant and controversial shift in a U.S. policy that had remained almost entirely unchanged for nearly half a century. Mr. Obama believes that the change in U.S. policy will ultimately help bring about a more tolerant, democratic Cuban government, according to White House Latin American policy adviser Dan Restrepo. 

Some investors are jumping with joy on the news. Many in fact, believe that this will in turn equate to one of those weeks when investors will have a significant opportunity at making money by merely monitoring the headlines.

Indeed, anytime the notion of boosting diplomatic ties with Cuba makes the front page of the New York Times, shares of funds such as Herzfeld’s Caribbean Basin Fund surge. Thus far, shares of the closed-end fund are up by well over 30%.

Before one begins investing, there are some financial tidbits one should be made aware of. Firstly, as stated by financial advisor and former editor of BreakAway Investor and Volume Spike Alert Andrew Snyder, a closed-end fund will react differently than a mutual fund, which many investors often confuse this investment for.

Because Herzfeld, as an example, does not redeem shares as they are sold, as would normally happen with a mutual fund, prices are tied to the same liquidity constraints of any other thinly traded stock. With a market cap of approximately $30 million, there are not as many shares of the fund to go around. This therefore indicates that today’s price surge is more of a factor of low supply, not high demand. The rally will not be a long-lived one.

Also, investors must be aware, the most ties the fund has are to Castro and his island is its own ticker symbol.

The vast majority of the fund’s holdings are in Caribbean Basin-related companies, chiefly in Mexico, the Bahamas, and Guatemala. This is far from a pure play on Cuba.

Over my career, this fund has popped and surged like clockwork on any news related to opening Cuban-American ties. In the days and weeks following each major move, share price trickles back down to where it started.

There are plenty of reasons for investing in this fund, but they have more to do with emerging markets than Cuban-American relations.

If you are thinking about making a move and putting some money into this fund, Andrew Snyder says back off.  The political risk of investing in Cuba in the opening throws of eased ties are still tumultuours and shares will be much cheaper in just a couple of weeks.