The No. 1 CEF Trap You Must Avoid
November 02, 2017 at 06:00 AM EDT
Of all the things investors ask me about closed-end funds, the main one is leverage. (A close No. 2 is CEF return of capital, which I discussed in a recent article here .) Yes, CEFs often borrow money and invest it in stocks or bonds. That scares some people, who then ask me if a leveraged CEF is safe. The answer is: sometimes. (Below I’ll show you 2 CEFs with 6.5%+ dividend yields that are using leverage perfectly to slingshot their shareholders to double-digit gains.) You see, leverage can boost your return in a bull market and magnify your loss in a bear market.… Read more