5 Popular CEFs Set to Fall Hard

The Contrary Investing Report

Investing and Trading News, with a Contrarian, Sarcastic Twist!

Closed-end fund (CEF) investors are going crazy again. This time, they’re grossly overpaying.

Today we’ll discuss five incredibly popular funds that are not likely to become more celebrated, and should be sold immediately.

Yes, first-level income hounds can be as greedy as they are fearful. In January 2016, they wanted nothing to do with CEFs. Exactly when many funds were about to embark on an 18-month tear!

Yet today, they’re willing to pay $1.49 for just $1 in assets. This is a recipe to lose money. Or at best, see your portfolio trade sideways.

This Discount/Premium as Margin of Safety (or Lack Thereof)

CEFs, unlike their mutual fund cousins, have fixed share counts.…
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After months of grinding higher, stocks have taken a bit of a breather. And one obscure corner of the market went lower still.

I know I don’t have to tell you that when that happens, contrarians like us are set up for some nice gains, so long as we don’t let emotion cloud our judgment.

And there are indeed some nice gains on tap with 3 cheap funds I’ll tell you about shortly. They’re all closed-end funds, a special kind of investment that throws off eye-popping dividend yields (one of the 3 CEFs I’ll show you yields a hefty 9.3% now!).…
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The desperate hunt for yield is getting way out of hand—and it’s setting up a terrific buying opportunity for you and me.

How out of hand?

Consider that some investors are so income starved they’re piling into sovereign bonds from Iraq—a country that’s still a war zone!

The latest issuance of five-year bonds by the Iraqi government was slated for $1 billion. But investors spied the 7% yield on offer here and crashed the doors, racking up nearly $7 billion in orders.

It’s sad, and totally unnecessary.

A Secure Portfolio With a Life-Changing 8% Yield

The worst thing is, in their scramble for income, the herd is charging right past yields that are even bigger—and far safer—here in the U.S.A., like the ones you get in my new “8% No-Withdrawal Retirement Portfolio.”

If you’ve been reading my column over the past two Mondays, you know I’ve been giving you a hands-on tour of this portfolio, which I’ve crafted to hand you $40,000 of income on a $500,000 nest egg.…
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Don’t take any stated yields for granted these days! The financial news has been flooded with dividend cuts lately, with Teva Pharmaceutical (TEVA) and Mattel (MAT) taking the hatchet to their payouts, and telecom Windstream (WIN) dropping its dividend too.

It’s dangerous to buy headline yields – or even supposedly “safe” blue chips with more modest dividends – without looking at the profits funding these payouts. Companies with high payout ratios (how much in earnings, funds from operations and other measures a company pays out in the form of dividends) are a twofold risk:

  1. High payout ratios can lead to a slowing in dividend growth, which means your payout is increasingly likely to fall behind inflation.


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Don’t take any dividends for granted today. Business disruption is accelerating as entire industries are being eaten alive.

Uber and Lyft? Killed cabs.

Amazon (AMZN)? It’s crushing retail, and starving their REIT landlords right before our very eyes.

And soon, they might team up to offer more same day deliveries – and make more rivals obsolete!

These types of disturbances have added a new layer to contrarian investing. Before, it was as simple as buying stocks when they were out-of-favor and holding them until they became back in vogue. The “Dogs of the Dow” strategy, for example, usually beat the market by banking the highest blue chip dividend yields – a sign that the tide was ready to turn back in the dogs favor.…
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If you’ve held Apple (AAPL) for a long time, you’re probably feeling pretty smug. And you should—the stock is way up over just about any time period and has nearly doubled in the last five years:

Apple’s Sparkling Performance

Clearly, Apple is an amazing stock. But what if I told you we can top that 96.3% gain in the next five years?

All we have to do is go someplace most investors aren’t. I’m talking about high-yielding—and almost totally ignored—closed-end funds.

The three I want to show you today are the PIMCO Dynamic Income Fund (PDI), the Tekla Life Sciences Investors Fund (HQL) and the Western Asset Mortgage Defined Opportunity Fund (DMO).
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The best time to buy a dividend grower is usually anytime – if you’re holding period is long enough, that is.

But what if you don’t have years to wait to get rich?

Today I’m going to show you a simple dividend growth “timing formula” that will help you accumulate great wealth with shareholder-friendly stocks. I’m talking about gains up to 40% per year, which means your money will double every two years.

Worse case, you might have to settle for 24% annually – which means your money will take three years to double!

Of course not every buy will bank you 40%.…
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There’s one very simple mistake millions of folks are making right now—and it’s costing them billions every year.

Of course, there are many boneheaded errors people make every day, like betting a lot of cash on a single stock. Or not having an investment plan.

While both of those will also drain your portfolio—and could even put your retirement on the rocks—neither is the most common pitfall you’ll find.

So what is?

Simple. Being scared.

That may sound strange, but hear me out.

Because fearful investors avoid risk, but they don’t realize that all investing involves risk. You might think putting your money in U.S.…
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Last week, I gave you a peek under the hood of my “8% No-Withdrawal Retirement Portfolio.” I also showed you a ridiculously cheap fund with a 9% dividend yield you can get in on now.

Today I’ll reveal another off-the-radar investment that forms the second pillar of this “crash-proof” portfolio.

I’ll also name a popular dividend ETF boasting a tempting 4.5% yield. That may sound great … but it’s actually a trap waiting to spring!

More on that in a moment.

First, the sector I’m going to draw your attention to is a corner of the market you must be in if you want to get the safe 8%+ dividend yields you’ll need to retire on dividends alone.…
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Exchange-traded funds (ETFs) offer “one-click” diversification. Investors buy ETFs to hedge against individual stock collapses.

ETFs can also offer big yields. We’ll look at 11 of them today, with dividends starting at 4% and climbing all the way up to an amazing 21%!

Is the 21%er a trap? Of course it is. But my favorite double-digit payer isn’t – in fact, its 10% payout is secure and spectacular. But this “last safe 10% yield” won’t last long – they never do!

So read on to learn about my best income buy as we round out today’s diversified dividend dozen.

Guggenheim Shipping ETF (SEA)
Dividend Yield: 4%

The Guggenheim Shipping ETF (SEA) invests in a bundle of companies with shipping operations across the world.…
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About Author

Brett

Hi, I’m Brett Owens – and I’m a financial junkie. My “problem” started incollege, when I got a little dose of the stock market – man, was I hooked…in no time, I was reading the Wall Street Journal religously.

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