It tough to find good investments with an 11% dividend yield.
It’s even harder to find those that pay MONTHLY income.
And it’s nearly impossible to find huge income plays trading at a 20% discount to the market! Today, I’m going to show you how.
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Other folks are collecting huge income today. And you can too.
These investments are in a niche market ignored by 97% of investors.
I’m talking about closed-end funds.
Closed-end funds operate like with mutual funds and exchange-traded funds (ETFs) – with capital allocated to various asset classes.
These are assets that you’d buy on the open market or through other fund investments including domestic bonds, common stocks, preferred stocks, foreign stocks and bonds, master-limited partnerships, options, commodities, gold, and precious metals.
Asset classes generally off-limits to ordinary investors, such as private bank loans, are also on offer.
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Closed-end funds are like ETFs: both trade on a stock exchange and both continuously trade during market hours.
Unlike a mutual fund, closed-end fund shares trade with the public, not with the sponsoring fund family. This means, unlike a mutual fund, CEF shares can be bought and sold at the market price during the trading day.
Unlike mutual funds and ETFs, the market price of a closed-end fund may differ from the net asset value (NAV) — the value of the investments it holds. This happens because the market price of a closed-end fund is influenced by factors that influence all publicly traded securities, namely investor sentiment.
Unlike mutual funds and ETFs, these investments can incorporate overlay strategies to boost income and total return. Many will use leverage. Some use call options. A few will even short-sell the market, thus offering hedge fund benefits sans the hedge fund costs.
Income is the immediate attraction, though. What’s more, income can be generated from investments that you probably wouldn’t consider.
For example, the GAMCO Natural Resources, Gold & Income Trust CEF (NYSE: GNT) pays a monthly distribution that generates an 11% yield. GAMCO is able to generate such alluring income by overlaying a covered-call strategy on the securities it owns.
With this investment, you get direct exposure to the price of gold. Plus, you collect a handsome 11% dividend.
You’re able to realize such an expansive yield and you can buy the GAMCO fund at a 9% discount to net asset value (NAV).
Buying at a discount to NAV boosts your income yield. It also boosts the capital-gains potential. You can gain buying appreciating assets. And you can gain even more when others recognize the appeal – and bid up the stock.
The discounts can be substantial.
The GAMCO CEF offers a big income yield – five times the dividend yield of the S&P 500. Its shares are priced at a decent 9% discount to NAV.
The Dividend & Income Fund (NYSE: DNI), in contrast, offers a decent income yield – 6.8%. You can buy the D&I fund’s income at a big discount to NAV. D&I shares trade at a 23% discount to NAV.
Pay $77 and get $100 of blue-chip stocks including Apple (NASDAQ: AAPL), CVS Health (NYSE: CVS), and Intel (NASDAQ: INTC).
Closed-end funds are a niche market, but hardly a shadowy one. Established institutional investors, such as BlackRock, Blackstone, Templeton, Nuveen, and Invesco, sponsor many of these investments.
Successful, recognizable investors even run some of them. Mario Gabelli and Jeffrey Gundlach are two worth mentioning.
If you like high-yield income and if you like the prospect of buying assets that generate the high-yield-income at a bargain price, consider joining the 3% of investors who own closed-end funds.
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