CSQ - 5 Best CEFs This Month For A 9% Yield (April 2024)
2024-04-21 09:00:00 ET
Summary
- For income investors, closed-end funds remain an attractive investment class that covers various asset classes and promises high distributions and reasonable total returns.
- Closed-end funds, or CEFs, are generally characterized by higher volatility and deeper draw-downs than the broader market. For these reasons, they are not suited for everyone.
- In this monthly series, we highlight five CEFs with solid track records that pay high distributions and offer "excess" discounts. We try to separate the wheat from the chaff using our filtering process to select just five CEFs every month from around 500 closed-end funds.
In this monthly article, we try to identify five closed-end funds ("CEFs") that have a solid historical performance, pay high enough distributions, and offer reasonable valuations at the current time. We also present a more diversified list of the top 10 funds.
Author's Note: This article is part of our monthly series that tries to discover the five best buys in the CEF arena at that point. Certain parts of the introduction, definitions, and sections describing selection criteria/process may have some commonality and repetitiveness with our other articles in this series. This is unavoidable and intentional to keep the entire series consistent and easy to follow for new readers. Regular readers who follow the series from month to month could skip the general introduction and sections describing the selection process (please skip to " Narrowing Down To 50 Funds ").
Why Invest In CEFs?
For income-focused investors, closed-end funds remain an attractive investment class that offers high income (generally in the range of 6 to 10%, often 8% plus), broad diversification (in terms of the number of holdings and variety of asset classes), and market-matching total returns in the long term, if selected carefully and acquired at reasonable price points. A $500K CEF portfolio can generate nearly $40,000 yearly compared to a paltry $8,000 from the S&P 500. Now, if you were a retiree and needed to use all the income (generated by the CEF portfolio), the portfolio probably would grow marginally or not grow much. Even then, it beats investment vehicles like annuities without some of their downsides. However, if you can withdraw 5% or less while re-investing the rest of the yield into the original fund (or new funds), the total return could exceed 10% over a long period. ...
5 Best CEFs This Month For A 9% Yield (April 2024)