Author Archive: Michael Foster

You’ve probably heard of the “4% rule.” It refers to the amount you can safely take out of a portfolio without running out of money in retirement. It even comes with a catchy acronym: SWR, or “safe withdrawal rate.”

This “wisdom” is gospel for many advisors, but it’s completely wrong! Blindly following it could mean staying in the workforce for years, even decades, longer than you have to.

Here are three reasons why you should ignore this myth. Further on, we’ll look at a better option that will hand you rich 7% dividends and price upside, too.

Reason #1: It’s not really 4% anymore

The first reason is that the 4% rule has even been disavowed by its author.… Read more

Here’s something most people don’t realize: in the world of high-yield closed-end funds (CEFs), 7% dividends are actually on the smaller side.

While the more conventional ETFs will pay you 3% if you’re lucky, high-yield closed-end funds can pay out a lot more. With an average yield of 7.2%, according to data from my CEF Insider service, CEFs pay much more than the SPDR S&P Dividend ETF (SDY), which yields a meager 2.7%!

Source: CEF Insider

There are some off-the-beaten path ETFs that do have big yields, like the Global X SuperDividend ETF (SDIV), which pays a shocking 12.3% dividend as I write this.… Read more

If there’s one trap I’ve seen investors fall into time and time again, it’s “chasing yield”: getting pulled in by a high dividend yield and not digging deeper to see if that payout is really sustainable.

An asset class that’s collapsed in 2020—and is now on the verge of vanishing completely—is a classic example of the dangers of getting distracted by a high current yield.

The investments in question are called exchange-traded notes (ETNs), some of which held out the promise of mid-double-digit yields. Unfortunately, these funds—which some folks disastrously confuse with their bigger brothers, exchange traded funds (ETFs)—came with a  catch that’s now sending their values to zero.… Read more

Closed-end funds (CEFs) are the ultimate “sleeper” investment—if you hold them, you know they hand out massive dividends (7% yields, on average!). Plus, their often-discounted share prices set you up for serious upside, too.

But it looks like the mainstream crowd is about to crash our CEF party. That means if you’re not in now, this is the time to climb aboard, before our CEFs’ big discounts become a distant memory.

CEF Managers Put Out the Bait

Funnily enough, the ones drawing attention to CEFs these days are CEF managers themselves. According to The Wall Street Journal, these pros have been cutting their fees in a bid to draw in new investors.… Read more

When I ask closed-end fund (CEF) investors what they like most about these funds, their answer is almost always the same: the dividends!

It’s easy to see why. The average CEF yields 7.1%, and that majority of the 500 CEFs in existence pay dividends monthly. Those two strengths put you miles ahead of someone who bought the average S&P 500 stock, with its pathetic 1.6% payout.

CEF Dividends Reign Supreme

Source: CEF Insider

With a 7.1% dividend, you’d collect just under $50,000 in annual income on a $700,000 investment. Compare that to a popular index fund like the 1.6%-paying SPDR S&P 500 ETF (SPY): you’d need over $3.1 million to collect the same $50,000 of income!… Read more

It’s the million-dollar question these days: how can this market be up double digits in an economy like this? And how can we dare hope for even a little more upside from here?

S&P 500 Defies Gravity

The truth is, there are plenty more gains to be made. But to get them, you need to look just a little beyond the big-name stocks most people limit themselves to. One overlooked place where there are still plenty of bargains (and outsized dividend yields!) to be had is in closed-end funds (CEFs). We’ll take a look at a high-yield CEF that offers you the perfect mix for today’s market—upside potential, downside protection and an outsized 7.2% dividend stream—in a bit.… Read more

Sometimes, picking the best contrarian stocks can be fairly straightforward.

For instance, back in early spring, it seemed obvious to anyone who went a bit deeper than the daily headlines to see that the market wasn’t giving tech stocks their due, given its importance during the lockdown and its potential for big post–COVID-19 growth.

So in April I wrote an article that highlighted the Columbia Seligman Premium Tech Fund (STK), a closed-end fund (CEF) primed to benefit from surging online shopping, rising mobile data use and the fast shift toward working from home. Plus, STK yielded an outsized 9.4%, so you were getting a large part of your profits in dividend cash.… Read more

Few people realize it, but there’s a way to get big dividends (I’m talking 6%+ payouts) from popular tech stocks—Facebook (FB), Amazon.com (AMZN), Apple (AAPL), Microsoft (MSFT) among them.

I know that when most people hear about tech these days, they immediately think the sector is overvalued. It’s easy to see why: tech is the sole driver of the S&P 500’s gain this year. In fact, when you hear people say the stock market is up in 2020, you might want to correct them and say that, in fact, it’s tech, and not the market as a whole, that’s up.… Read more

I hate to see so many folks buying into the hype and snapping up popular ETFs like the Vanguard S&P 500 ETF (VOO).

Not only are they denying themselves a proper dividend (with VOO, you’d need a $3-million nest egg to generate a liveable $40,000 income stream!), they’re missing out on gains, too.

That’s because this is no longer a market you can simply ride with a passive index fund. We’re now entering a new investment world that requires two things:

1. Active management (because the pandemic has sharply split this market into winners and losers) and …
2. More income. With the volatility we’ve lived through, I think you’ll agree that a high cash stream, like, say, the 7%+ dividends you get from actively managed closed-end funds (CEFs) provides a lot more safety than here-today, gone-tomorrow paper gains.

These days, I’m hearing from a lot of readers who are worried about this market rebound—and wondering whether they should buy high-yield stocks or sit on the sidelines.

They’re right to be worried—the S&P 500’s 19% surge (!) in the last 12 months has only been topped a handful of times in the last 20 years, and none of those 12-month periods saw a pandemic that shuttered the global economy.

Pandemic Strikes … Stocks Soar?

So what the heck is going on here? And how should you respond?

Well, here’s my (admittedly contrarian) take: the stock market should be at record highs, and you should be buying stocks now—especially high-yield stocks—as long as you choose the right ones, of course.… Read more