This 5.1% Payer Thrives on Inflation (You Won’t Believe How)

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This 5.1% Payer Thrives on Inflation (You Won’t Believe How)

Far too many investors think inflation is bad news for closed-end funds (CEFs), for a simple reason: they fear it’ll boost CEFs’ borrowing costs. (Because CEFs, of course, use leverage to varying degrees.)

That sounds like a reason to worry. Inflation, after all, boosts interest rates, and higher rates obviously mean CEFs would have to pay more to service their loans.

Bad news, right?

Not so fast! Because nearly everyone forgets the other side to the story—that inflation (at least these days) comes with a strong economy—and that drives investment returns that’ll more than offset any small rise in CEFs’ borrowing costs.… Read more

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These 3 Huge Dividends Are Still Pricey (but These 41 Aren’t)

Has the market bottomed, or are we headed for another leg down before we can start to even think about any upside? It’s a debate that will be with us for a while yet.

But maybe not in every corner of the market. Because there’s a funny thing happening with closed-end funds (CEFs): for some of these high-yield investments, the recovery has already come.

Let me explain.

In a selloff, a CEF can get hit in a couple ways, namely from the market and from investors. In the case of regular stocks, these are the same. But for CEFs, there’s a key difference: while CEFs trade on the open market, like stocks, they have a fixed number of shares (hence the name“closed-end funds”).… Read more

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