Author Archive: Michael Foster

We income investors don’t talk about international stocks nearly enough. That’s too bad, because there are ways we can use them to build a massive income stream and make our investments safer, too.

In fact, there’s one way, using high-yield closed-end funds (CEFs), we can “time” US and international stocks to get a 9.2% yield we can build over time by making simple moves to “rebalance” between US and overseas CEFs from time to time.

It all starts with China, because there’s a spark there that sets the stage for our 9.2%+ overseas payout strategy.

Chinese Stocks: 13% Yearly Gains Ahead?… Read more

This has been a great year for stocks—and a great year for our 8%+ yielding closed-end funds (CEFs), too.

That makes sense: Many CEFs invest in stocks, and many more hold bonds issued by publicly traded firms, so what’s good for stocks tends to be good for CEFs.

CEFs March Higher in ’24

Source: CEF Insider

When we look at the proprietary indexes we use to track CEFs at my CEF Insider service, we see that the equity sub-index has done the best, with a 21% year-to-date total return. Corporate bonds are second at 14.3%. Municipal bonds, known for lower volatility and risk, have gained a bit less, as you’d expect, at 6.6%.… Read more

I know that plenty of our readers are self-directed investors who love nothing more than to build—and run—their own portfolios. Digging into a fund’s prospectus and annual reports is something they look forward to.

But if you’re like many people, you look to a wealth manager to oversee at least some of your investments for you, or at the very least help with things like tax optimization, financial planning and setting up an estate plan.

There are, however, a few things we need to bear in mind when selecting one. For starters, while many wealth managers can help their clients set up a program that puts them on a path to financial independence, the reality is that wealth managers face intense competition, and that can provide a temptation among less-experienced ones to cut corners.… Read more

If you’ve been investing for a while, you’ve probably thought about private equity more than once. Adding exposure to “PE” firms, which buy and sell privately held businesses, is a great way to diversify beyond the big names of the S&P 500.

But of course, to get in on that action, we have to be either institutional investors or have a net worth high enough to be “accredited.”

Most people stop there. But there is a way to access private equity through a kind of lesser-known “back door.”

For example, you could buy an ETF like the Invesco Global Listed Private Equity ETF (PSP) right on the stock market.… Read more

The price-to-earnings (P/E) ratio has long held a lock on investors’ imaginations. So when it jumps to near 30, like it has in the last few weeks, they’re inclined to think stocks are pricey and pull back.

Now is not the time to do that.

Instead, we’re going to do what we always do at times like these: Look to a closed-end fund (CEF) that keeps us invested in stocks but gives us a hedge against a potential pullback. Three hedges, actually:

• The sale of covered call options, which generate extra cash for the fund, supporting the dividend it pays out to us.

CEFs are renowned (by the few people who know about these high-income funds, of course!) for their outsized dividends—around 8%, on average, across the board as I write this.

But buying a CEF is not like buying a regular stock. When it comes to picking CEFs, we’ve got a whole bunch of different factors sitting in front of us that we need to weigh.

Sometimes CEFs Are Cheap for a Reason

There are, for example, some things that go beyond, say, past performance or discounts to net asset value (NAV, or the value of a fund’s portfolio—the main measure of a CEF’s value).… Read more

Well, that was fast. As you no doubt know by now, stocks gave back their post-election bump nearly as fast as they took it. Now they’re more or less where they started pre-election.

There’s a story behind this “pop and drop” that showed me something we need to bear in mind more and more as we head into 2025 (and a new presidential term): The need to diversify our portfolios, not only within stocks but (especially, with more volatility likely) beyond them.

And that need for diversification goes for our holdings of high-yielding closed-end funds (CEFs), too.

Now, market veterans will no doubt be quick to say that these short-term moves are just noise, and in the long term it doesn’t really matter who is the president.… Read more

If you have a wealth manager working for you, I have one simple piece of advice: Seriously consider moving on from them (or managing your investments yourself) if they recommend following the “60/40” rule.

It simply says that most people should invest 60% of their assets in stocks and 40% in government bonds for retirement.

In a moment, we’ll talk about one fund we’d have completely missed out on by following 60/40 ourselves—or by signing on with a wealth manager who does so. (And not to worry, this one is still available for us to tap into for a solid 5.5% dividend, with upside.)… Read more

Immediately after President-Elect Donald Trump won his second term last week, the US dollar surged, while US Treasuries fell:

Election Sends Dollar Up, Treasuries Down in Early Trading

Both moves are opposite sides of the same coin: Investors believe Trump’s policies will be inflationary. The theory suggests this would happen for a couple of reasons:

1. The US government will spend more, and interest rates will rise higher than rates elsewhere in the world in response. That will attract foreign capital to America while making it less attractive for capital to leave the US.
2. All of that extra capital in America will boost economic activity and demand for the dollar.

I can’t tell you how many times I’ve mentioned closed-end funds (CEFs) to investors and been met with blank stares in return.

It’s too bad more people don’t know about these powerful income plays because …

1. CEFs let you diversify, not only within stocks but beyond them. Among the 500 or so CEFs out there are funds that own stocks, corporate bonds, municipal bonds, real estate investment trusts (REITs) and more.
2. CEFs often trade at discount to net asset value (NAV, or the value of their portfolios). This means we can buy shares of high-quality firms like Apple (AAPL) for less than market value.