Author Archive: Michael Foster

You just can’t argue with the power of index investing, right?

After all, index funds boast ultra-low fees and simply track the market. And since stocks return about 7% per year on average, you should do well in the long run. Vanguard, founded back in 1975 on this very idea, built a massive firm (current assets under management: $7.2 trillion) on it.

And to be honest, for many folks, index funds do work. The company’s Vanguard S&P 500 ETF (VOO) is a go-to in the space, along with rival Select Sector SPDRs’ SPDR S&P 500 ETF Trust (SPY). (Though I always prefer VOO due to its lower fees; when you’re simply tracking the index, fees matter a lot.)… Read more

We need to talk about “financial independence” for a second. It’s one of those catch-all terms you see a lot in financial-industry marketing, for good reason: it means completely different things to different people.

Maybe your idea of financial independence is having a bit of extra income on the side, to go with a regular job you love. Or maybe you want to work only on the projects you like, without the unreasonable boss and 9-to-5 grind. Heck, maybe you want to clock out completely.

Me? I’m a big fan of picking projects I want to do—and I’ve accomplished that in my forties, thanks to the 8%+ yielding investments I want to take you on a guided tour of today: closed-end funds (CEFs).… Read more

Look, we’re all contrarians here at Contrarian Outlook. It’s right in the name, after all. But even we contrarians have to pick our battles. Because sometimes what sounds like a canny contrarian move can turn out to be, well, too cute by half.

A good example is buying counter to the VIX, which you may know as the market’s “fear gauge.” It’s a common contrarian belief that when the VIX is low (as it is today) and the market is relatively calm, it’s a good time to sell. And when the VIX is high, and mainstream investors are in a panic, it’s a good time to buy.… Read more

Let’s say we want to quit working and attain financial freedom—not in decades, but in just a few years. Or heck, maybe less. How do we do it?

One “must-have” is the need to clock out on dividends alone. It’s the only way to retire without being forced to sell stocks into a downturn, shriveling our wealth and income at the same time.

To hit our “dividends-only” retirement goal, then, we’d need a minimum yield of 8% on our $500K. That way we’re assured of banking at least $40,000 in dividends a year. But with inflation still “sticky,” we’d ideally like to do better—pulling in around $50,000 or more.… Read more

We’ve written before about the big disconnect between the rising stock market and (ridiculously!) negative media coverage we’ve seen over the last 16 months. Well, the media is at it again, this time with the whole First Republic Bank (FRC) fiasco.

And we contrarians are going to keep using overtorqued coverage as our guide to grabbing big discounts and steady dividends in closed-end funds (CEFs) and other assets.

Before we go too far, there are a couple things we need to keep in mind with this FRC mess: first, as was the case with other troubled banks, including SVB and Credit Suisse, a buyer (or the government) swooped in and managed the problem.… Read more

With the recent pullback from the market’s high this year, we’ve got a nice second chance to buy some terrific dividend stocks cheap. But don’t waste your time with lame payers like General Mills (GIS), with its 2.5% yield. Or the miserly 2.1% you get from a so-called “Dividend Aristocrat” like McDonald’s (MCD).

Even though inflation is trending downward, it’s still at 5%. That’s well ahead of these pathetic blue-chip yields—and with the economy still performing well, it could be a while yet before it slows meaningfully from here.

Bottom line: We just can’t afford to own low payers like these any longer.… Read more

If you’ve missed out on this market’s roughly 6% gain this year, don’t worry. There’s an easy way to grab that same 6%—and more–and do so in safe dividend cash.

The key, of course, is closed-end funds (CEFs), our favorite high-yield vehicles, specifically the 8%+ payouts these funds offer.

Before we get to a couple of high-yielding CEF tickers (yielding 8.8% and 10.2%), let’s dive into the market’s gain and go sector by sector, because it tells a clear story of how some investors have seen that 6% rise and some have seen even more (or less!).

First up, if you’re not holding a significant amount of tech, you’re likely already behind, as the sector, a laggard last year, is up 16% so far in 2023.… Read more

We’ve got a sweet opportunity to grab a 14% dividend sitting in front of us, and we can thank the ongoing sale on bonds for this deal.

This double-digit payer—which has held that huge payout steady for years—holds junk bonds, or corporate debt that falls below the investment-grade line.

Isn’t there more risk here? Sure. But we’re well-compensated by the big yields junk bonds pay. Heck, even the yield on the benchmark SPDR Bloomberg High Yield Bond ETF (JNK) is a healthy 5.8% now.

But JNK really is for novice investors. When we go with CEFs like the one we’ll delve into in a moment, we can boost our payout by more than double, to 14%—and get paid monthly.… Read more

With the first quarter behind us, now is a good time to ask ourselves if stocks—and especially 8%+ yielding closed-end funds (CEFs)—are getting just a little ahead of themselves.

Let’s start with stocks, then we’ll get granular, looking at how CEFs (which usually lag stocks by a few weeks) are setting up as we move deeper into Q2.

Source: CNN

One glance at the CNN Fear and Greed index and you could be forgiven for thinking things are getting a bit too hot out there. This indicator— a useful indicator of investor sentiment—was pegged at extreme fear for most of 2022, so the reversal was inevitable.… Read more

Inflation is falling—but is a recession next, or will we get that vaunted “soft landing” Jay Powell keeps talking about? Wouldn’t it be great if there was a dividend-payer built for either outcome?

Just such an income play exists—it’s called a covered-call closed-end fund (CEF). They’re smart buys now because they pay big dividends: the CEF we’ll break down today—the Nuveen Dow 30 Dynamic Overwrite Fund (DIAX)—yields a healthy 7.8%.

That not only gives us a high income stream, but it also increases our safety, as we’re getting the vast majority of our return in safe dividend cash.

That’s one part of DIAX’s appeal—especially if a recession is headed our way (more on that shortly).… Read more