Bonds have been bloodied since the Federal Reserve cut rates.
We could dip into bond exchange-traded funds (ETFs)—they’ll have the same tailwind at their back. But I prefer CEFs over bland ETFs for three very simple reasons:
- They yield more.
- They can use debt leverage to juice returns.
- We can buy some CEFs at a discount to their net asset value (NAV).
Note the emphasis on “some.” Once it was clear a bull run in bonds was a certainty, some CEFs’ discounts vanished and haven’t returned. But fortunately for us, other CEFs are still trading for less than they’re worth—while delivering an average of 10% in monthly income, no less.
Legit bargains, or cheap for a reason? Let’s explore.
This post originally appeared at Contrarian Outlook.