Author Archive: Michael Foster

With over 500 closed-end funds (CEFs) on the market, how do you choose the best one?

It’s not an easy question to answer, because there are literally dozens of metrics any CEF investor should look at before buying.

Luckily, I’ve found a way to boil those down for you. In a moment, I’ll reveal the 5-point system I’ve carefully designed to pick winning CEFs for our CEF Insider service.

(If you joined me for my exclusive CEF Insider live webcast on October 25, you know about this proven system and you got 2 of my latest CEF investment ideas for 7.1% dividends and double-digit upside in 2018.… Read more

At CEF Insider, we regularly pound the table on top-notch US closed-end funds (CEFs).

And we still see America as our “go to” for huge yields, income and big gains. But if you take a pass on other parts of the world, you’ll miss a proven way to cut your risk (thanks to the tremendous variety in the global economy) and big upside too.

That’s why we constantly keep our eyes trained on the horizon. And today, one particular place has caught our attention: Asia.

For a long time, Asian stocks were a sucker’s bet, for a couple reasons.

The biggest?… Read more

Remember when I said there were more than 2,400 closed-end funds, mutual funds and ETFs beating the S&P 500?

Well, today we’re going to dive into three of those funds. Unlike many of their cousins, these aren’t one-hit wonders.

All three boast outsized dividend payouts far larger than those of any S&P 500 stock: all the way up to 8.3%!

They also give you instant diversification and world-class management. You can see that in each fund’s stock-picking prowess, which is translating into gains that crush the S&P 500 SPDR ETF (SPY):

Leading the Index by a Mile

So let’s dig deeper to see how these funds tick and what place they might have in your portfolio.… Read more

Back in February 2016, I wrote an article titled “4 Reasons to Buy This 9.2% Yielding Equity Fund”. That fund was the AGIC Equity and Convertible Income Fund (NIE).

Since then, NIE has done this:

Almost 50% Gains in a Year and a Half

Oh, and did I mention that NIE pays a 7.4% dividend? That’s right: $100,000 in this fund gives you $616 per month in cash.

Despite the conventional wisdom about dividend yields, that high yield doesn’t come with high risks. Not only has NIE been growing its dividend since 2009, but that income stream is well covered by the fund’s investments—again, thanks to its big returns, as we see in the chart above.… Read more

One thing investors ask me about all the time is return of capital, or ROC.

In a nutshell, these folks are mainly worried that ROC is simply a fund taking your money and paying you a dividend from your money without actually making a positive return on it.

Worse, they’re doing this after taking out their fees, which are much higher than the fees you’d pay on an index fund!

Before you get your pitchfork out, know that this perception of ROC is wrong. In reality, return of capital is often very good for investors.

For starters, ROC isn’t simply a fund taking your money and giving it back to you.… Read more

Any way you slice it, it was a big bet.

I’m talking about the legendary wager Warren Buffett made with hedge fund manager Ted Siedes a decade ago.

You may recall this $500,000 gamble. It went like this: if hedge funds could beat the S&P 500 over a decade, Siedes would win. If not, Buffett would win.

The result: the index crushed the funds Siedes chose, prompting him to concede defeat last May.

He went down fighting, though, writing that it was the hedge funds’ global focus that caused them to underperform, not the prevailing “wisdom” that stock picking is little more than gambling.… Read more

There’s a terrific buying opportunity taking shape in the municipal-bond market. Almost no one sees it coming, and you can thank a familiar friend for it.

I’m talking about the Fed—specifically Janet Yellen’s irresistible urge to hike interest rates in December, low inflation be damned.

She recently made that intention crystal clear, and futures markets responded by baking it in, with rate-hike odds leaping from a 30% chance to 76.4%:

Final Notice: A Christmas Rate Hike Is Coming

Stocks, for their part, have proven resilient, though there are still bargains to be had despite the market’s climb this year.

But there’s another place where you’ll find even better bargains if you’re patient.… Read more

If you’re a dividend fan and you spot an 18% yield, you’re going to sit up and take notice.

But your radar will also probably go up for another reason: you know outsized payouts like that pretty much always come with outsized risk too.

Which brings me to the weird funds I’m going to show you today.

Their 18% average yield masks something shocking: they’re not only dangerous but they’re not even income investments! They’re something else entirely—and if you fail to pick up on that and buy, they could blow a hole in your retirement portfolio.

Let me explain, starting with…

Where We Found These 18% Payouts

The funds I’m talking about are called exchange-traded notes (ETNs), a close cousin of exchange-traded funds (ETFs), another asset class I recommended staying clear of in a September 12 article.… Read more

It’s one of the first questions readers usually ask me:

“Don’t closed-end funds’ high dividend yields make them dangerous?”

It’s a good question, with CEFs offering yields of 8% or more. It’s also a general (but far from certain, as I’ll explain shortly) rule that higher yields bring a higher risk of a dividend cut.

Take Frontier Communications (FTR), a stock my colleague Brett Owens sounded the alarm on in April.

The telecom provider was yielding a whopping 16% before it slashed its dividend in June 2017. The stock plunged when the cut was announced:

Slashed Dividend, Slashed Share Price

FTR is yielding a whopping 20% now, thanks to its collapse in price (because you calculate yield by dividing the annual dividend rate into the current share price).… Read more

You’ve probably heard the “wisdom” on mutual funds a million times.

It goes like this: mutual funds collect high fees and most still fail to beat the market, so why bother when you can buy a low-cost index fund, like the SPDR S&P 500 ETF (SPY) or the Vanguard 500 ETF (VOO), and tag along with the market’s performance?

To be fair, it hasn’t been a bad strategy. Look at the total return those funds have posted over the last five years:

Indexing Has Paid Off—But We Can Do Better

Nearly doubling your money in half a decade is nice—but does that really mean mutual funds are ready for the dustbin of history?… Read more