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.…