Your 2% bonds are going to make you broke. You need to buy these safe, higher paying dividends instead.

We’ll get to these “real yields” (up to 9.3%!) in a moment. First, let’s recap. Treasury yields just took their biggest bath in weeks, sending the 10-year T-note to 2%. Less than a year ago, the 10-year was flirting with (a not exactly nosebleed) 3%.

And now that Fed chair Jay Powell has fallen in love with the doves (whether by choice or by force), he’s going to keep rates low for a long time. Which means bonds will have no place in a retirement portfolio geared towards income.

It wasn’t always this way. Decades ago, bonds rightfully earned their reputation as a source of not just safe, but substantial income that could actually support a high-quality retirement.

But Times, They’ve Been A-Changin’

But for nearly a decade, investors subject to traditional wisdom have been put in peril. They’ve been told that bonds are safe, that they’re “wealth preservers.” However, they now yield so little that their income is almost completely gobbled up by inflation, and their paltry coupons don’t even support basic necessities.

Put another way: If you rely on plain-Jane bonds in retirement, you’ll be underwater paying for even the most bare-bones lifestyle.

The table below shows the monthly income from a $1 million nest egg 100% invested in Treasuries, as well as the average Social Security paycheck, stacked up against a list of basic retirement costs compiled by NerdWallet.

Bond investors come up $380 shy each and every month under this low-frills budget. And even if they didn’t spend a penny in “entertainment,” they’d still be broke.

This “new normal” requires a different set of income strategies. You need better yields and substantial payout growth to make sure you’re ahead of the inflation curve.

Of course, you’re not going to get those from Uncle Sam at 2%. You will, however, find them in this five-pack of bigger paying bonds.

BlackRock Core Bond Trust (BHK)
Type: Multi-Sector
Distribution Yield: 5.6%

The BlackRock Core Bond Trust (BHK) closed-end fund (CEF) lives up to its name, providing a core collection of primarily investment-grade bonds. Investment-grade corporates make up about a third of the portfolio, with double-digit holdings in U.S. government bonds, junk debt and agency mortgages. It also holds developed- and emerging-market debt, securitized products, bank loans and more.

About three-quarters of the portfolio is rated BBB or above, so quality is no issue. And you even have roughly 15% exposure to international debt, which gives you a splash of geographic diversity.

A core ETF such as the iShares Core Aggregate Bond ETF (AGG) will offer typically a little better overall credit quality, but less than half the yield. That’s the power of closed-end funds, which can use leverage and wily active management to juice returns and distributions.

A 7% discount to the fund’s net asset value (NAV) would seem to cinch the deal. After all, who wouldn’t want broad bond-market exposure with 2x the yield for 93 cents on the dollar?

The problem is that there are better options. BHK has delivered 7.1% in annual total returns since inception, versus a 7.6% category average. Plus it has underperformed in most other time periods, too.

Luckily, BlackRock has more to offer, as I’ll show you in a minute.

Calamos Convertible & High Income Fund (CHY)
Type: Multi-Sector
Distribution Yield: 9.3%

Calamos offers another type of somewhat-blended fixed income, though it’s far from the “core” allocation you’d get via BHK.

The Calamos Convertible & High Income Fund (CHY) invests in a portfolio of convertible securities and other high-yield fixed income instruments. Convertible securities are the lion’s share at 57%, followed by corporate bonds at 32%.

Convertible bonds get very little press. They’re like traditional bonds in that they make regular, fixed coupon payments. But as the name implies, they can be converted–into common stock. So, you can enjoy the income of bonds with the potential upside of equities.

While convertibles’ yields are typically less than regular bonds, CHY’s other holdings, as well as a hefty amount of leverage, help fuel a massive distribution of more than 9% despite a slight reduction in the payout late last year. Its 7.7% annualized total return since inception is in line with the category average.

A 3% discount to NAV is a bargain considering CHY has traded at a premium on average over the past year.

Convertibles Are Cruising in 2019

BlackRock Taxable Municipal Bond Trust (BBN)
Type: Taxable Municipal
Distribution Yield: 6.1%

It’s hard to read “taxable municipal bond” without doing a double-take. Isn’t the whole appeal of a municipal bond the fact that you get to pull a fast one on the IRS?

Sure, tax-free munis can offer smaller yields thanks to that tax benefit. But what happens when you collect that income in a tax-advantaged account like an IRA?

That’s right: You lose municipal bonds’ primary perk.

Enter the BlackRock Taxable Municipal Bond Trust (BBN), which invests at least 80% of its assets in taxable munis, including Build America Bonds. The fund can, if necessary, invest in other assets, from Treasuries to even tax-exempt bonds, but it mostly stays faithful to its charge.

There’s plenty to like here. BBN is able to juice a 6.1% yield its taxable municipal bonds, which it has converted into a 9.4% average annual total return since inception. That’s better than the category mark by 50 basis points. And you can purchase that outperformance at a tidy little discount of about 4% to NAV right now.

That makes BBN an unorthodox but nonetheless attractive buy.

High Taxable Muni Yields Get BBN Over the Hump

Cohen & Steers Limited Duration Preferred & Income (LDP)
Type: Preferred
Distribution Yield: 7.6%

I love preferred stocks. These under-covered, under-loved “hybrid” securities fall well off the radar of many investors. But for those in the know, they’re a dependable source of high yield.

Cohen & Steers skims a lesser-traveled area of the preferred world with its Limited Duration Preferred & Income (LDP) closed-end fund, which, as the name suggests, invests in low-duration preferreds. Just like many investors will duck into low-duration bonds to fight off interest-rate risk, they can tap into this fund when they’re worried about rising rates.

Given the Fed’s current disposition, that’s a big strike against it for now. So is a mere 2% discount that sits below its 52-week average discount of about 5%. (In other words, we’re likely to see this fund trading at a bigger bargain down the road.)

But I always make sure to have a plan for every market condition, and that includes an eventual return to rising rates, whenever that might be. Under that condition, LDP and its collection of about 150 holdings–including preferreds from JPMorgan Chase (JPM) and Bank of America (BAC)–will be the right way to play this asset class.

BlackRock Corporate High Yield Fund (HYT)
Type: High Yield
Distribution Yield: 8.1%

Junk debt has looked less like a fixed-income product and more like a hard-charging blue chip in 2019. That has led to stellar returns for the likes of the BlackRock Corporate High Yield Fund (HYT).

BlackRock’s HYT: Don’t Throw This Junk Away!

HYT’s more than 1,100 holdings aren’t exclusively junk debt, of course. While 83% of the fund is dedicated to junk, another 11% of assets are piled into term loans, with a peppering of collateralized loan obligations, preferred stocks and other assets.

This closed-end fund takes chances, too. Only a little more than a third of the fund is in the highest credit-quality level of junk (BB); much more is in B (45%), and another 14% is dedicated to CCC-rated bonds. That’s much farther down the ladder than what you get in typical junk index funds such as iShares iBoxx $ High Yield Corporate Bond ETF (HYG) and SPDR Bloomberg Barclays High Yield Bond ETF (JNK). BlackRock’s managers double down on those risks, too, with a healthy 28% leverage ratio.

The chutzpah is worth it. BlackRock Corporate High Yield has stomped its category return, 8.3%-6.7%, since inception. And anyone who steps into the fund today can buy HYT’s high-performing assets at a 9% discount.

How Retirees Can Collect $3,125 Per Month in Dividends Alone

These CEFs all have one important trait in common: They distribute cash to shareholders not every quarter, but every month.

That’s a boon to retirees who will have to pay all their monthly bills with retirement income.

But how much will you need every month to get by?

The experts at Merrill Lynch say you need a $738,400 nest egg to retire. The talking heads on CNBC and Fox Business will tell you the magic number is $1 million or $1.5 million. Suze Orman collectively dropped our jaws when she said “You need at least $5 million, or $6 million. Really, you might need $10 million.”

$10 million?

They’re right—if you invest in low-yield bonds or the types of so-so-yielding blue-chip stocks that the financial media deems as “safe.” But there’s nothing safe about collecting so little income in retirement that you have to start taking large chunks out of your nest egg, which in turn saps your income potential even more.

Editor's Note: The stock market is way up – and that’s terrible news for us dividend investors. Yields haven’t been this low in decades! But there are still plenty of great opportunities to secure meaningful income if you know where to look. Brett Owens' latest report reveals how you can easily (and safely) rake in 8%+ dividends and never worry about drawing down your capital again. Click here for full details!

Source: Investor Place

I receive a lot of questions concerning the different investments on closed-end funds (CEFs); particularly the category of high yield investment types. A lot of investors see the yields and monthly dividends and decide to jump into CEFs without understanding what they are buying.

You can find several danger signals that will tell when to stay away from particular funds. Today I will discuss one such signal.

A closed-end fund is an actively managed investment portfolio whose shares trade on one of the stock exchanges. The closed part comes about because after an initial IPO a fund’s sponsor does not issue new shares.

The amount of capital in a CEF only changes by the investment results and dividends paid.

These funds cover the gamut of investment types. Tax-free municipal bonds funds are a popular category.

The CEF Connect website shows 83 municipal bond focused CEFs. Taxable income funds cover a wide range of fixed income investment types including convertible bonds, high-yield bonds, preferred stock funds and senior loan funds.

The website shows 144 funds in taxable income category. U.S. Equity has 13 sub-categories including sectors such as MLPs, commodities, real estate and health/biotech. This category includes 134 funds.

Lastly, there are the non-U.S. funds, with global funds and area specific funds. You will find 70 CEFs in this group.

Related: Dump These 3 Popular Income Funds Before They Blow Up Your Portfolio

With this broad mix of investment types and very loose rules governing the category, there are a lot of ways a poorly managed CEF can lead to investor losses.

In this article I cover one danger signal related to the basic nature of a closed-fund. Since a fund’s sponsor won’t redeem shares, and the shares only trade on the stock exchange, it is common for CEF’s to trade at premiums or discounts to their net asset values or NAV.

The NAV is the real value of a share if the fund was liquidated and the proceeds paid out to share owners. If you buy a CEF trading at a discount, you are paying less than the share is currently worth.

Paying a premium means you are paying more than the current real value.

Here are five closed-end funds trading at big premiums to NAV. There is no reason to buy one of these and if you own one, a collapsing premium would cost you money even if the fund is performing satisfactorily.

PIMCO California Municipal Income Fund (PCQ) seeks to provide current income exempt from federal and California income tax.

Since October 2018 the premium on PCQ shares has expanded from under 11% to the current 34.3%. A return to the previous premium would offset five years of the current 4.9% tax free yield.

I guess California based investors really don’t want to pay taxes!

Oxford Lane Capital Corp. (OXLC) is a senior loans fund that seeks to achieve its investment objective of maximizing risk-adjusted total return by investing in debt and equity tranches of CLO vehicles.

Investors are attracted to this fund due to the 15% distribution yield.

OXLC is a CEF that could be the poster child for closed end fund dangers, and the 34.8% premium to NAV is just one of the problems with this CEF.

Stone Harbor Emerging Markets Income Fund (EDF) primary investment objective is to maximize total return, which consists of income on its investments and capital appreciation.

The Fund will normally invest at least 80% of its net assets Emerging Markets Securities.

In regular speak, this is an emerging markets debt securities fund. It owns bonds issued by countries such as Argentina, Indonesia, Russia and Ghana.

The fund launched in 2010 and has produced an average 2.8% annual return on NAV. Not a good reason to justify the 15% distribution yield or 35.4% premium to NAV.

PIMCO Strategic Income Fund (RCS) seeks high current income with capital appreciation through investments in global sovereign debt securities.

Despite the “global” in its stated investment goals, the fund has over half its assets in Fannie Mae mortgage backed securities.

While most CEFs limit themselves to 25% to 30% leverage, this fund is 67% leveraged, doubling the equity with borrowed money.

I see a time bomb when interest rates start to rise. RCS currently trades at a 35.5% premium to NAV.

Gabelli Utility Trust (GUT) invests primarily in foreign and domestic companies involved in providing products, services, or equipment for the generation or distribution of electricity, gas, water, and telecommunications services.

The primary claim to fame is the fund is run by celebrity investment manager Mario J. Gabelli, CFA.

Neither his management, the 6.78% 5-year average annual return nor the 8.6% yield justify this fund’s 37.8% premium to NAV.

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Get your hands on my most comprehensive, step-by-step dividend plan yet. In just a few minutes, you will have a 36-month road map that could generate $4,804 (or more!) per month for life. It's the perfect supplement to Social Security and works even if the stock market tanks. Over 6,500 retirement investors have already followed the recommendations I've laid out.

Click here for complete details to start your plan today.

Let’s face it: you hardly ever get decent income from commodity stocks. And when you do, these payouts are usually first to get the axe next time, say, oil nosedives.

And with oil doing this…

Oil Falls—Oil Companies’ Profits to Follow 

… you may worry that it’s about to get harder to squeeze income out of oil companies.

Still, if you’re worried about inflation or the Federal Reserve distorting markets, or if you just want to hedge your stock portfolio, you’ll likely turn to commodities at some point. And there’s no more established inflation hedge than gold.

There’s just one problem: gold doesn’t produce anything.

As Warren Buffett said, you could put all the world’s gold in one big cube and it still wouldn’t produce income for you. That’s usually how it goes—and most gold miners don’t pay dividends because they’re too busy pumping cash into the business to mine more gold.

Fortunately there’s another way to get cash out of gold—and no small amount, either: I’m talking a 13.6% dividend yield.

How? With the GAMCO Global Gold Natural Resources & Income Trust (GGN), an actively managed closed-end fund (CEF) that holds energy and gold stocks, and pivots between them when the time is right.

Current holdings include Barrick Gold (GOLD), Newmont Mining (NEM), Chevron (CVX) and Exxon Mobil (XOM).Plus, as I just mentioned, GGN now yields a whopping 13.6%.

And if you’re worried that GGN’s strategy can’t beat its benchmarks, don’t be. Here’s what the fund has done in 2019:

GGN Tops Gold, Energy—and the Market Itself

Here we see that GGN has easily beaten stocks. Plus it’s also topped the energy sector and physical gold—the latter of which is tracked here by the SPDR Gold Shares (GLD). Both energy and gold are far below stocks in general, due to worries that inflation won’t rise soon, despite the Fed’s hints it may cut rates shortly.

If you’re wondering how a gold/energy fund can crush both gold and energy while also beating the stock market, let me explain.

With its portfolio flexibility, GGN can pivot between the two asset classes and buy what’s undervalued at the time. It can also avoid the worst of a downturn by cutting back on the weaker asset class, whether it’s gold or oil. This is why the supposedly safer energy index fund, the Energy Select Sector SPDR (XLE), fell further than GGN in late 2018—and while XLE still hasn’t recovered, GGN is already in the black:

Flexibility Is GGN’s Strength

What about the dividend?

GGN hasn’t cut distributions since early 2017, when the fund was still picking up the pieces from the 2014 oil crash, which also resulted in a dividend cut for GGN in 2014 (it’s worth noting XLE’s dividends were also cut at the same time, as were those of almost all energy companies). Fortunately, oil has been predictably range-bound since, making it easier for energy-fund managers to maintain their portfolios and payouts:

Oil’s New Normal 

And with GGN’s recent solid showing, it looks like the fund has found the perfect strategy for oil’s new normal, while also dipping into gold markets when necessary. If the Fed follows through with rate cuts to inflate the economy, expect inflation to follow, making GGN’s gold holdings, its strategy and its dividend a decent hedge against a Fed-driven stock market.

Urgent: Grab This Growing 10.7% Dividend Now—While It’s Cheap

If you want to go beyond volatile commodities, you can bulk up your portfolio’s safety and bag a mammoth 10.7% income stream with my top stock-focused CEF pick now.

I’ve made this top-secret CEF my No. 1 pick in stock-focused funds for 2 reasons:

• It boasts an amazing 10.7% dividend yield.
• Its cash payout is exploding, up an incredible 150% in the last decade!

How does this fund do it?

It’s run by an investment all-star team cherry-picked from 5 of the sharpest management firms on Wall Street.

Together, this crew invests in a “no-gimmicks” portfolio of value and growth stocks, all of which have deep moats protecting their businesses: names like Visa (V), Microsoft (MSFT), Alphabet (GOOGL) and Abbott Laboratories (ABT).

So how has this all-star team performed?

They’ve dominated, with most of my pick’s monstrous total return coming in cash, thanks to that huge dividend payout:

Crushing the Market in Cash

Finally, this fund trades at an unreal 5% discount as I write this. It’s only a matter of time before that shifts to a massive premium, propelling my pick’s market price higher as it does.

Michael Foster has just uncovered 4 funds that tick off ALL his boxes for the perfect investment: a 7.4% average payout, steady dividend growth and 20%+ price upside. — but that won’t last long! Grab a piece of the action now, before the market comes to its senses. CLICK HERE and he’ll tell you all about his top 4 high-yield picks.

Source: Contrarian Outlook

Stock Symbol	Ex-Div Date	Pay Date	Div Payout	Yield
DX	06/25/19	7/3/19	0.2	38.50%
PVL	06/2719	07/15/19	0	18.13%
ORC	06/27/19	07/31/19	0.1	15.00%
TWO	06/28/19	07/29/19	0.4	12.66%
NRZ	06/28/19	07/26/19	0.5	12.63%
MITT	06/27/19	07/31/19	0.5	12.36%
CHMI	06/27/19	07/30/19	0.5	11.82%
ANH	06/27/19	07/29/19	0.1	11.52%
AGNC	06/27/19	07/10/19	0.2	11.35%
CLNC	06/27/19	07/10/19	0.1	11.29%

Data current as of market close 06/19/19.

Pay Your Bills for LIFE with These Dividend Stocks

Get your hands on my most comprehensive, step-by-step dividend plan yet. In just a few minutes, you will have a 36-month road map that could generate $4,804 (or more!) per month for life. It's the perfect supplement to Social Security and works even if the stock market tanks. Over 6,500 retirement investors have already followed the recommendations I've laid out.

Click here for complete details to start your plan today.

Source: Investors Alley

Today I’m going to give you a strategy—and a strong 6.5%-yielding fund—that both shine when the market throws a tantrum.

And both are way better than what most people do when things get rough: cash in.

Many studies have shown that trying to time the market simply doesn’t work. And even if you did have the superhuman ability to get in and out perfectly, you’d still underperform a buy-and-hold approach. Thanks to compound interest, keeping skin in the game is more important than trying to save your skin.

Options: Your (Surprising) Friend When Markets Roil

Instead of fruitlessly trying to time the market, we’re going to do something that actually works (and takes far less effort!).

We’re going to hedge our stock portfolio with a tool many folks think is dangerous but really isn’t (when used the way we’re going to use it).

I’m talking about options.

Now it is completely true that buying options is akin to gambling. But we’re not going to buy options; we’re going to sell options (call options, specifically). And that changes the game completely.

Best of all, we’re going to sell our call options through a “covered-call fund,” a special type of closed-end fund (CEF)run by professionals who do all the work for us.

(Call options give the holder the right, but not the obligation, to buy a security before a certain date. The buyer pays the seller—in this case our fund—for this right, and that cash stream helps smooth out covered-call funds’ volatility.)

Funds that sell call options against a portfolio of stocks can do better than funds that simply buy and hold in volatile times, while also outperforming in sideways markets. Since stocks have been both volatile and sideways for the last year, this strategy is tailor-made for today.

That brings me to our pick, which both buys high-quality companies at a good price and limits its downside with options.

This Fund Defends Your Nest Egg and Yields 6.5%

Our CEF is one of the largest of its class and one of the most discounted: the BlackRock Enhanced Equity Dividend Trust (BDJ).

This is a 6.5%-yielder trading at an 8.9% discount to NAV, even though its discount was half that just a few months ago. Those two facts are important because they mean BDJ’s managers only need to get a 6% return in the stock market to maintain the fund’s dividend payout, which is easy, since the market averages an 8% annual return over the long haul.

And BDJ has done even better, with a 9.4% annualized return over the last decade.

A Sparkling History

In fact, BDJ’s dividend has remained the same for the last four years—ever since the Fed started raising rates and volatility in stocks increased. That makes sense, considering the fund’s portfolio and strategy.

Large-Cap Safety Through and Through

With a portfolio of large-cap stocks from all sectors and a focus on cash-flow generation, BDJ marries value-investing and covered-call strategies in one easy-to-buy fund.

Plus, those 6.5% dividends are a nice treat.

Yet BDJ isn’t getting much respect—at least not yet. After its discount to NAV widened at the end of 2018, when investors panicked, BDJ is still cheaper than it was a year ago, even though its NAV has pretty much fully recovered:

An Underappreciated Bargain

If volatility comes back, that NAV recovery may slow down a bit, but it should stay on the same trajectory. And if volatility disappears, expect BDJ’s discount to NAV to continue to vanish. That spells out a rare win-win for income investors looking to protect themselves while still getting a reliable income stream.

This 7% Dividend Is Recession-Proof—and Tax-Free, Too

Covered-call funds aren’t the only CEFs that can build some Zen into your portfolio during a market wipeout.

There’s another type of high-yield CEF that does the exact same thing. I’m talking about municipal-bond funds.

I know. Just the name is enough to make your eyes glaze over. But don’t let that put you off, because “muni” funds are perfect for any investor’s portfolio.

That’s because they’re backed by the most reliable consumer there is: the government!

States, counties and cities issue munis to fund badly needed infrastructure, such as roads, bridges, airports and railroads.

That makes them a solid source of income on their own—and you can boost your dividend stream even more if you buy your munis through a CEF, like the one I just recommended in the latest issue of my CEF Insider service.

Check out the steady upward climb my new pick has put on over the past year (in blue below), compared to the motion sickness your typical S&P 500 investor suffered:

Imagine Holding This “Steady Eddie” Fund

And it still has plenty of room to run!

Michael Foster has just uncovered 4 funds that tick off ALL his boxes for the perfect investment: a 7.4% average payout, steady dividend growth and 20%+ price upside. — but that won’t last long! Grab a piece of the action now, before the market comes to its senses. CLICK HERE and he’ll tell you all about his top 4 high-yield picks.

More CEF Insider subscribers have been asking me how to deal with volatility lately. It’s easy to see why:

Another Downturn Appears … Then Disappears

So today I’m going to give you an easy way to cushion your portfolio in this whipsawing market. I’m actually going to show you three ways.

All three are closed-end funds (CEFs) with a special “insurance policy” that tones down market lurches. But you’ll still enjoy market recoveries, like the one we’ve seen in recent days.

The best part: we’ll keep our income stream strong and growing, thanks to these three funds’ massive 6.7%+ dividend yields. That kind of income stream isn’t only nice to have, it’ll be critical when we run into the next crisis, as I’ll explain further on.

The Covered-Call Edge

Let’s start with the traditional ways most people try to cut down volatility. Those would be holding cash—which, of course, gets you zero return—or so-called “safe” assets like Treasury notes, which pay a measly 2.5% at best.

If we want to have any kind of livable income stream in retirement, we need to do better. Which brings me to the solution I talked about off the top. It’s called a covered-call fund.

Let me explain.

“Covered call” refers to a strategy where a fund holds a basket of stocks, then sells “call options” (or the right to buy a security if it hits a certain price) to an outside buyer against one of its stock holdings. That generates income, as the buyer pays the seller (in this case our closed-end fund) a “premium” for the call option. This extra cash flow, in turn, acts as a kind of hedge if the fund’s stocks fall in value.

That’s how covered-call funds take the edge off a volatile market. Now let’s talk income—and dive into the three specific covered-call funds I have for you today.

3 “Laid Back” 6.7%+ Dividends You Can Buy Now

Since these funds receive cash for their call options, you can expect a bigger dividend stream from them. And that’s exactly what you get.

Massive Income Up for Grabs

The chart above shows three passive index ETFs you’re probably familiar with: the SPDR Dow Jones Industrial Average ETF (DIA), the SPDR S&P 500 ETF (SPY) and the Invesco QQQ Fund (QQQ). This trio attempt to match the performance of the Dow Jones Industrial Average, the S&P 500 and the Nasdaq 100 indexes, respectively.

As income plays, these three passive ETFs are all duds.

While DIA’s 3% yield is relatively strong, as you can see above, it’s the best of a pretty meager bunch when you compare them to their covered-call CEF alternatives: the Nuveen Dow 30 Dynamic Overwrite Fund (DIAX), the Nuveen S&P Dynamic Overwrite Fund (SPXX) and the Nuveen NASDAQ 100 Dynamic Overwrite Fund (QQQX).

Heck, QQQX actually yields 10 times more than its ETF cousin!

These three CEFs track the three indexes very closely, but with one big exception: they also sell covered calls against their holdings, which is why their yields are many times greater than those of their index counterparts.

Also, since they sell call options on their portfolios, the value of their portfolios doesn’t fall as sharply during times of volatility. That’s why DIAX’s net asset value (NAV) bottomed above that of DIA in the last month:

A Step Ahead of the Index Once …

And DIAX wasn’t the only one, since QQQX’s NAV, while still down, as tech hasn’t recovered as much as other sectors, still didn’t hit the lowest point QQQ’s NAV did:

… Twice …

And for the broader index fund, the covered-call approach also helped SPXX’s NAV escape the lowest point SPY did:

… And Three Times!

So, as you can see, holding these covered-call funds helps limit your fund’s downside during brief periods of volatility while also providing you with the market’s upside when stocks recover.

But the most important part is the income.

Your “Dividend Hedge” Against the Next Crash

For any retiree, or anyone who uses their portfolio as a source of income, these funds are a no-brainer, and a way to safeguard against accelerated losses during a downturn.

Think of it this way: if you held SPY over SPXX and you needed a 6.7% income stream, you would need to sell part of your portfolio during the downturn to guarantee that income stream keeps coming in. But SPXX avoids this forced-loss selling: thanks to its higher yield, you’re getting a huge slice of your return in cash, cutting the need to sell anything when you don’t want to.

During times of protracted volatility, like we saw in late 2018, being able to avoid selling is the difference between double-digit losses and long-term gains driven by patience and perseverance. And that’s exactly what these CEFs make possible.

This “Hidden” 7% Dividend Is Recession-Proof—and Tax-Free, Too

Covered-call funds aren’t the only CEFs that can build some Zen into your portfolio during a market wipeout.

There’s another type of high-yield CEF that can do the exact same thing: municipal-bond funds.

Muni-bonds are among the steadiest CEFs you’ll find because they’re backstopped by the most reliable consumer there is: the government!

States, counties, towns and cities issue municipal bonds (or “munis”) to fund badly needed infrastructure, such as roads, bridges, airports and railroads.

That makes them a solid source of income on their own—and you can boost your dividend stream even more if you buy your munis through a CEF, like the one I recommended just a few days ago, in the latest issue of CEF Insider.

Check out the steady upward climb my brand-new pick has put on over the past year (in blue below), compared to the motion sickness your typical S&P 500 investor suffered:

Imagine Holding This “Steady Eddie” Fund

And it still has plenty of room to run!

Michael Foster has just uncovered 4 funds that tick off ALL his boxes for the perfect investment: a 7.4% average payout, steady dividend growth and 20%+ price upside. — but that won’t last long! Grab a piece of the action now, before the market comes to its senses. CLICK HERE and he’ll tell you all about his top 4 high-yield picks.

Source: Contrarian Outlook