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What Is a Closed-End Fund? The ABCs of CEFs
Closed-end funds (CEFs) are an attractive option for income investors who want a combination of a high amount of passive income and diversification.
Too bad you rarely hear about them.
Because of their big yields – the average CEF yields 7.3%, according to data from CEF Insider – CEFs are especially popular with retirees. That's because they can retire on much less principal than would be necessary with an index fund such as the Vanguard 500 ETF (VOO).
For instance, if you wanted to achieve $50,000 in annual income, it would require a mere $685,000 nest egg if invested in CEFs with that average 7.3% yield. But you would need nearly $4.4 million invested in the S&P 500 at today's yields to match that annual sum.
And that's not all closed-end funds offer.
I frequently discuss this fund class in my newsletter, , and I'd like to take you on a deep dive into this all-too-often-overlooked area of the market. So read on to learn what CEFs are, how they work, and how these
