The 3 Worst Mistakes CEF Investors Make (and How to Avoid Them)

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The 3 Worst Mistakes CEF Investors Make (and How to Avoid Them)

Most folks buy closed-end funds for one reason: big yields!

But that’s not the only reason—and depending on your situation, it may not even the best reason for you, as I’ll show you shortly. (I’ll also reveal 3 tricky, but easily avoidable, blunders many folks make with CEFs).

First, there’s no doubt CEF payouts are legendary.

According to BlackRock’s latest quarterly update, dividend yields range from an average of 2.25% in the lowest-paying CEF sector (emerging market equity) to 9.9% in the highest paying (municipal-bond funds). (The muni-bond fund yield is on a tax-equivalent basis and based on a 43.4% tax rate, as munis are exempt from federal income tax):

A Rich Hunting Ground for Yield Fans
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7 High Tech Dividends up to 14%

Income investors often ignore the technology sector. That’s a shame, because tech stocks have been one of the best sources of dividend growth over the past few years.

Plus, some familiar names now pay substantial yields. In fact, in just a minute, I’ll introduce you to seven tech stocks that offer payouts into the mid-double digits!

But first, let’s talk about the biggest income mistake that countless investors are making right now.

Most first-level thinkers pile into “defensive” stocks like consumer staples and utilities. Unfortunately, while most of these companies do offer secure dividends, they don’t offer much upside.

And investors who “don’t care because they’re in it for the dividends” end up with payout raises that severely lag those lavished upon tech investors:

Utilities and Staples: …
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