Author Archive: Michael Foster

When I explain the appeal of closed-end funds (CEFs), I usually start with the big headline and throw a few bullets afterwards, kind of like this:

CEFs yield an average 8%, and many of those dividends are sustainable and growing.

• CEFs invest in a variety of reliable and popular assets, like stocks, bonds and real estate investment trusts (REITs).

• CEFs often trade at discounts to the value of their portfolios. This is known as the discount to net asset value (NAV), and it means we can buy stocks, bonds and real estate through CEFs for less than we’d pay on the open market.

All year long, we’ve been waiting for our favorite high-yield investments, 8%+ yielding closed-end funds (CEFs), to jump, along with the rest of the market.

Now, nearly nine months in, we’re still waiting! It’s not surprising: the income-focused investors who buy these funds are typically a cautious bunch.

Not that we mind at my CEF Insider service. We’ve been taking advantage of the extra time to pick up bargain funds and build our income streams. As I write this, our CEF Insider portfolio yields around 9%, with many of our picks paying dividends monthly.

But a fresh report from the Federal Reserve Bank of Chicago is a sign the CEF train could be about to leave the station.… Read more

Closed-end funds (CEFs) really are the “Swiss army knife” of investments: with one click, they let us grab big income (the average CEF yields 7.9%), diversify (within and beyond asset classes) and buy their holdings for cheap!

But let’s be honest, when it comes to CEFs, it’s all about the dividends.

On that front, there’s a lot to say. For one, many CEFs pay monthly, making managing our income easy: CEFs’ high yields mean we could potentially replace a $6,500 monthly paycheck with less than $1 million invested and live on dividends alone.

And check out these discount and dividend stats from across the CEF space:

• A third of all CEFs yield over 10%.

In my CEF Insider service, we focus exclusively on buying strong, 8%+ yielding closed-end funds (CEFs). It’s our MO! And there are a lot of CEF bargains now, as cautious income investors remain skittish following the 2022 correction.

But today I want to talk about when it’s time to sell a CEF. You might recall the old Warren Buffett quote that his favorite holding period is “forever.” Of course, Buffett was talking about blue-chip stocks, which are his forte.

With CEFs, our play is a bit different. Sure, we want to hold these high yielders (the average CEF tracked by CEF Insider yields 7.9% today) for as long as we can, to make the most of their high—and often monthly—dividends.… Read more

If there’s one thing that stands out about the market for our favorite high-yield investments—closed-end funds (CEFs)—in 2023, it’s this: individual investors are still too skittish to jump in.

That’s our chance, because this “lag” means CEFs’ prices haven’t taken off, and these funds are throwing off dividend yields in the same neighborhood they were at the start of 2022—around 7.5%, on average, today. And by being just a little picky (as we will be with the fund talk about a bit further on), we can amp those payouts up to 10%+.

Combine that with the discounts to net asset value (NAV, or the value of CEFs’ portfolios) available across the space, and we’ve got a shot at real upside, especially when you consider how far behind the S&P 500 that CEFs have lagged this year.… Read more

Last Monday, we talked about the two biggest mistakes many investors make when buying high-yielding closed-end funds (CEFs). Today we’re taking the opposite tack and delving into three things to look for to pick the very best of these 7.5%+ payers for your portfolio.

The upshot? If all three of these strengths are present, you likely have yourself a winner. But first things first—let’s talk a bit about what sets CEFs apart. These funds are different from ETFs and mutual funds in two key ways.

1. CEFs have fixed share counts and generally can’t issue new shares to new investors (hence the “closed” in the name).

If you haven’t noticed, I’m a bit of a data nerd. I could go on and on about all the economic numbers I watch for you every month, but these weekly articles just don’t give me the room. So I have to be selective.

There are hundreds (I’m not exaggerating; I’m up to 157 so far) of data points that prove the US economy is doing better than most people think, and that 2022’s doom-and-gloom was way overdone (and in many cases plain wrong).

Unfortunately, my editor would never let me cover all of them, especially in one article! And, let’s be honest, most people wouldn’t want to sit through 157 data points, either.… Read more

Over a decade ago, closed-end funds (CEFs) helped me achieve financial independence. Since then I’ve seen hundreds of other people use them to get there, too. I’m certain these unloved funds—payers of 8%+ dividends—can help you do the same.

Well, I shouldn’t say “unloved.” “Misunderstood” is more accurate.

As I write this, the CEFs tracked by my CEF Insider service yield 8.3% on average. But because the CEF market is small and off the radar to most folks, many don’t know what to look for in these high-yielding funds—if they know about them at all.

Today we’re going to change that by looking at a couple common mistakes people make when choosing CEFs, and how these errors can lead them to miss out on 8%+ yielders that offer sustainable payouts and strong gain potential, too.… Read more

It’s back to the 1980s in the corporate-bond world—with yields through the roof. (I’m talking safe 9.9%+ payouts when we buy bonds through high-yielding funds like the one we’ll delve into below.)

If you were investing back then, you may recall that bond yields soared well into double-digit territory before falling back to earth:

Source: Economic Report of the President (2012), Government Printing Office

In other words, if you bought a corporate-bond fund in 1981, you’d have gotten a 14.2% return every year for the bonds’ duration, which in some cases was a decade. And you’d have gotten that return in cash.… Read more

It’s prime time to grab two bond funds tossing out 8%+ dividends now—and we have the Fed (of all things!) to thank for this opportunity.

Last year, as we all know (too well), the Fed raised interest rates at the fastest pace in history, bringing them to their highest point in nearly 20 years. As a result, many corporate bonds (represented by the red line above) are yielding a lot more than they used to.

Take, for instance, two bonds from Apple (AAPL), one issued in August 2020 (when the world looked a lot more precarious than it does today, as we still had an unresolved pandemic worldwide) and one issued in May 2023.… Read more