CEF Holdings ---- April 2025

Just curious, but for those who have more experience with CEF investments, what do you think of holding a CEF in a Roth and using the distributions as a tax-free trickle of income (post 59.5 yo and 5 yr holding of Roth account)? Any concerns with that?
Hi. I don't understand the ins and outs of Roths because I've never had one, but high yield CEF distributions in a tax-free account look like a crazy high yield muni to the tax lads. AND they are also differently but very valuable in tax-deferred accounts like IRAs.
Regards, Dick
 
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A little late to the party , but finally went to fully invested by picking up HIO, DMO and BKT.
I'll have some more to invest after my monthly draw at the end of the month.
I seriously love the fact that I live on this income AND get to buy more shares every month. Crazy!
Overall Avg. yield 10.56% at the moment and just over 40%of the portfolio is fixed income.
 
Just curious, but for those who have more experience with CEF investments, what do you think of holding a CEF in a Roth and using the distributions as a tax-free trickle of income (post 59.5 yo and 5 yr holding of Roth account)? Any concerns with that?
It is exactly what I'm doing. My roth consists of dividend producing assets, several CEFs. I am 51 and won't touch it until 59.5 or later. Currently it pays $3500/month which gets reinvested. I expect it will be paying $7000/month tax-free by the time I can withdraw. Even though it is a smaller part of my overall 401k, I hope it pays for majority of expenses. About once a quarter I review what I have and make changes. If a fund looks like it's having trouble paying the distribution, I might switch to another fund. Or if a fund has appreciated a lot, I might sell and buy another with higher current yield.
 
@pb4uski Just one comment on those stop losses - if you had put in a stop loss on PDI last week you would have gotten probably badly burned and had the ignominy of seeing the price come mostly back up vs where you got stopped out (which can be much lower than where you set your stop).

Position sizing and making sure you set your stop either close or far far away helps. Mental stops also useful and can prevent algorithmic fakeouts.
Exactly! I’ve seen enough flash crashes to know putting in a stop loss order can result in a very rude awakening. I’ve only ever used limit orders.
 
...About once a quarter I review what I have and make changes. If a fund looks like it's having trouble paying the distribution, I might switch to another fund. Or if a fund has appreciated a lot, I might sell and buy another with higher current yield.
From what I've seen so far, CEFs are not buy and hold investments. Experienced people here are actively buying and selling. Compared to a buy-and-hold 60/40 fund like VBIAX, most CEFs that I back tested on portfoliovisualizer have larger drawdowns and lower returns over a long period say from 2016 onward. For me, I can naturally pay attention to the companies of the few individual stocks I own, or funds that track the S&P500 or Nasdaq, and make some sense. But It's harder to figure out the price movements of CEFs. Still trying to learn...
 
From what I've seen so far, CEFs are not buy and hold investments. Experienced people here are actively buying and selling. Compared to a buy-and-hold 60/40 fund like VBIAX, most CEFs that I back tested on portfoliovisualizer have larger drawdowns and lower returns over a long period say from 2016 onward. For me, I can naturally pay attention to the companies of the few individual stocks I own, or funds that track the S&P500 or Nasdaq, and make some sense. But It's harder to figure out the price movements of CEFs. Still trying to learn...
NAVs of most bond-like CEFs are still down since the fed's rate increase cycle to combat inflation. Regardless, those CEFs are reliably paying the same distribution. This is similar to buying and holding treasuries. Those treasury prices are down significantly if you bought a few years ago, but your yield doesn't change. You'll lose your shirt if you have to sell those treasuries, the same as with CEFs.
 
From what I've seen so far, CEFs are not buy and hold investments. Experienced people here are actively buying and selling. Compared to a buy-and-hold 60/40 fund like VBIAX, most CEFs that I back tested on portfoliovisualizer have larger drawdowns and lower returns over a long period say from 2016 onward. For me, I can naturally pay attention to the companies of the few individual stocks I own, or funds that track the S&P500 or Nasdaq, and make some sense. But It's harder to figure out the price movements of CEFs. Still trying to learn...
NO traded assets --- not bonds or stocks or portfolios of them in various wrappers --- are buy-and-hold investments. Drawdowns affect long-term total returns in the same way realized losses do. Every dollar of loss or drawdown avoided echoes positively through any investment horizon. And every drawdown simply "accepted" for the sake of holding assets diminishes total returns over any investment horizon.
Regards, Dick
 
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Hi folks....Just making a test post. Seems my old moniker name is still intact here. I am also a transfer from the Fidelity Community Forum. Good to see familiar names. I will post my CEF holdings in a separate posting. I used to know a guy who lived in Capecod...:)

This is approximately my 28,000 post (lifetime)!

Retiredat48...aka R48
 
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NO traded assets --- not bonds or stocks or portfolios of them in various wrappers --- are buy-and-hold investments. Drawdowns affect long-term total returns in the same way realized losses do. Every dollar of loss or drawdown avoided echoes positively through any investment horizon. And every drawdown simply "accepted" for the sake of holding assets diminishes total returns over any investment horizon.
Regards, Dick
I must respectfully disagree. One can buy and hold CEFs, or any other income investment, as long as one is a true income investor, someone with an infinite time horizon. That is, one does not intend to sell what one buys, but to use it to maximize portfolio income in perpetuity. Importantly, that is a very different strategy than someone who is a total return investor (i.e. capital gains and income), which includes anyone who sells an investment or even plans on doing so. With an infinite time horizon, one does not care if the market goes up or down, because one has no intention of realizing any gains. If anything, it helps if the market does go down so one can reinvest at a higher distribution rate. Under these specific conditions, the only concern is a distribution cut or the termination of the fund itself. Also it makes sense to use a small amount of leverage if you can get a good margin rate. Leverage increases volatility and income at the same time. If you have an infinite time horizon the volatility does not matter short of a margin call. The income always does! Regards, Paul
 
From what I've seen so far, CEFs are not buy and hold investments. Experienced people here are actively buying and selling. Compared to a buy-and-hold 60/40 fund like VBIAX, most CEFs that I back tested on portfoliovisualizer have larger drawdowns and lower returns over a long period say from 2016 onward. For me, I can naturally pay attention to the companies of the few individual stocks I own, or funds that track the S&P500 or Nasdaq, and make some sense. But It's harder to figure out the price movements of CEFs. Still trying to learn...
I think what you are seeing here is a group of pretty active traders who greatly enjoy tweaking their portfolio and moving in and out of holdings to achieve maximum gain. Nothing wrong with that, but I would argue that a lot of CEF and income investors like myself are perfectly content to buy and hold for many years. One of the services I subscribe to has very little trading of the core CEF's.

As far as backtesting goes, it seems like a bit of cherry picking as to which CEF are you going to test.
ADX ( one of the oldest CEF's) vs SPY vs VBIAX, Annualized returns: 14.8% vs 13.4% vs 8.6% respectively. So winner , winner chicken dinner is ADX. Or run it again with a 4% withdrawal adjusted for inflation: 11.8% vs 10.3% vs 5.0% , Winner ADX again. But in reality I could pick a different type of fund and results will be different. OK, one example a bond fund PTY, same scenario with 4% withdrawal adjusted for inflation: PTY 8.5%, SPY 10.3%, VBIAX 5.0%.

I view CEF's and dividend investing as a great way to increase your income in retirement. I started to transition out of buy and hold index funds about 2 years before I retired and completed the shift YESTERDAY about 2 years after I retired. If you are interested keep reading and educating yourself. Lots of good resources out there and I have mentioned them a few times. But check out Amazon and grab a couple of books. Hey, it's not for everybody and that's OK. Enjoy your day!
 
Just curious, but for those who have more experience with CEF investments, what do you think of holding a CEF in a Roth and using the distributions as a tax-free trickle of income (post 59.5 yo and 5 yr holding of Roth account)? Any concerns with that?
That is my strategy. In Roth: 85% CEF and BDC. for income and 15% in FBGRX for growth.
 
Hi folks....Just making a test post. Seems my old moniker name is still intact here. I am also a transfer from the Fidelity Community Forum. Good to see familiar names. I will post my CEF holdings in a separate posting. I used to know a guy who lived in Capecod...:)

This is approximately my 28,000 post (lifetime)!

Retiredat48...aka R48
Welcome aboard 48.
Regards, Dick
 
I must respectfully disagree. One can buy and hold CEFs, or any other income investment, as long as one is a true income investor, someone with an infinite time horizon. That is, one does not intend to sell what one buys, but to use it to maximize portfolio income in perpetuity. Importantly, that is a very different strategy than someone who is a total return investor (i.e. capital gains and income), which includes anyone who sells an investment or even plans on doing so. With an infinite time horizon, one does not care if the market goes up or down, because one has no intention of realizing any gains. If anything, it helps if the market does go down so one can reinvest at a higher distribution rate. Under these specific conditions, the only concern is a distribution cut or the termination of the fund itself. Also it makes sense to use a small amount of leverage if you can get a good margin rate. Leverage increases volatility and income at the same time. If you have an infinite time horizon the volatility does not matter short of a margin call. The income always does! Regards, Paul
Hi Paul. Naturally if you remove total return as the portfolio objective, then my observation is irrelevant. BUT in the world of income CEFs, such a large portion of TR are distributions and distribution reinvestments that avoiding a drawdown typically results in the generation of more income.
Regards, Dick
 
Hi Paul. Naturally if you remove total return as the portfolio objective, then my observation is irrelevant. BUT in the world of income CEFs, such a large portion of TR are distributions and distribution reinvestments that avoiding a drawdown typically results in the generation of more income.
Regards, Dick
I agree with both of you. There are times when selling a vehicle (CEF or otherwise) makes sense. My thought is on distribution/Div cut.

But barring that, and the fact that in my case I have excess distributions beyond my income needs, my "active trading" is simply buying more income producing assets which many times is just increase of current holdings.

Flieger
 
I tried to trade these years ago with mixed results. Now I use the dips to add and move things around as distribution coverages are updated. I bought them to juice my income and that’s exactly what they do.

My portfolio is sitting about 3% off its all time high so my total return is fine even with the recent pullback, but income from my retirement in 2020 to today is up almost 300%.

The value of my account changes, but my income doesn’t or it even goes up as I add.
 
It is exactly what I'm doing. My roth consists of dividend producing assets, several CEFs. I am 51 and won't touch it until 59.5 or later. Currently it pays $3500/month which gets reinvested. I expect it will be paying $7000/month tax-free by the time I can withdraw. Even though it is a smaller part of my overall 401k, I hope it pays for majority of expenses. About once a quarter I review what I have and make changes. If a fund looks like it's having trouble paying the distribution, I might switch to another fund. Or if a fund has appreciated a lot, I might sell and buy another with higher current yield.
Are you active or mostly buy and hold? Do you hold CEFs similar to the ones listed in this thread?
 
Hi folks....Just making a test post. Seems my old moniker name is still intact here. I am also a transfer from the Fidelity Community Forum. Good to see familiar names. I will post my CEF holdings in a separate posting. I used to know a guy who lived in Capecod...:)

This is approximately my 28,000 post (lifetime)!

Retiredat48...aka R48
Welcome R48. Good to see you here.
 
Hi folks....Just making a test post. Seems my old moniker name is still intact here. I am also a transfer from the Fidelity Community Forum. Good to see familiar names. I will post my CEF holdings in a separate posting. I used to know a guy who lived in Capecod...:)

This is approximately my 28,000 post (lifetime)!

Retiredat48...
 
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NO traded assets --- not bonds or stocks or portfolios of them in various wrappers --- are buy-and-hold investments. Drawdowns affect long-term total returns in the same way realized losses do. Every dollar of loss or drawdown avoided echoes positively through any investment horizon. And every drawdown simply "accepted" for the sake of holding assets diminishes total returns over any investment horizon.
Regards, Dick
I agree with dick here. The only clear B&H asset in my opinion is a major index ETF which you purchase in some horrendous dislocation at perhaps a 50% discount to expected price. Congratulations, all 2009 SPY buyers at 67.10. That you can fire and forget. For every AAPL I can show you a ENRN, so only B&H stocks works only if you only pick winners. I believe the indexes work to pick winners and losers, and skew it in your advantage. But this is a CEF discussion.

For most of us, the future is optimistic, but uncertain. And I will perpetually maintain, cash is also an asset class. So taking gains when it seems rich, and rebuying when it seems cheap, is a reasonable strategy. Anticipating dividend cuts or fund mergers or activist shareholder actions, or FX realignments, federal reserve policy direction shifts or political regime changes all require adjustments.
So for CEF's you play the game and:
1. Try not to buy CEF IPO's (they are usually associated with haircuts)
2. Monitor not only the price of the cef but the nav (you can get on dedicated websites like cefconnect or try X+CEF ticker+X on yahoo finance or whatever you use.
3. Track discount/premium and yield.
4. Consider the UNII of a fund (less useful than it once was imho in a rising rate environment) and if given, the coverage ratios (PIMCO does these monthly)
5. Follow smart people like @dickoncapecod who know what they are talking about.
 
I agree with dick here. The only clear B&H asset in my opinion is a major index ETF which you purchase in some horrendous dislocation at perhaps a 50% discount to expected price. Congratulations, all 2009 SPY buyers at 67.10. That you can fire and forget. For every AAPL I can show you a ENRN, so only B&H stocks works only if you only pick winners. I believe the indexes work to pick winners and losers, and skew it in your advantage. But this is a CEF discussion.

For most of us, the future is optimistic, but uncertain. And I will perpetually maintain, cash is also an asset class. So taking gains when it seems rich, and rebuying when it seems cheap, is a reasonable strategy. Anticipating dividend cuts or fund mergers or activist shareholder actions, or FX realignments, federal reserve policy direction shifts or political regime changes all require adjustments.
So for CEF's you play the game and:
1. Try not to buy CEF IPO's (they are usually associated with haircuts)
2. Monitor not only the price of the cef but the nav (you can get on dedicated websites like cefconnect or try X+CEF ticker+X on yahoo finance or whatever you use.
3. Track discount/premium and yield.
4. Consider the UNII of a fund (less useful than it once was imho in a rising rate environment) and if given, the coverage ratios (PIMCO does these monthly)
5. Follow smart people like @dickoncapecod who know what they are talking about.
The wisdom of Wall Street is usually just a sales pitch or tactic. For many buy and hold are sacred. But the reality of death by drawdown is hard to ignore and becomes impossible to ignore as your timeline gets shorter.

From market timing, to trend following, to dynamic asset allocation, to static allocation, to buy and hold and everything in between, there’s many flavors of investor.

For me, I believe buy and hold is hype and I left it behind along with static asset allocation years ago. My investment clients benefited from this in 2000 and 2009. My only regret was not changing sooner.

Like everything it depends on many factors what approach to investing works for you. For me buy and hold is never my top choice.

That said it bears repeating that you must act on only the facts that are on the table, trying to see past the here and now, foreseeing the future and acting on it is always a slippery slope. Just taking into consideration the data of the here and now, is a huge task. I try very hard not to muck it up with foreseeing the future.
 
PIMCO's March UNII numbers are out and they aren't great, at least for the CEFs that I own

Columns in orange added by me

PIMCO March UNII.jpg
 
Thank you to all who are posting. This is very intriguing to me even though I am 10+ years from retirement. I love the scenario that @COcheesehead discussed on the first page of 30% of their portfolio is CEFs that generate 65% of their income. I am going to start doing the same thing. Dedicating more of my portfolio to these and get the snowball rolling.

I am scanning through CEFconnect looking at funds while researching them on morningstar.
Came across ECAT - BlackRock ESG Capital Allocation Term. 25% dividend with a 1.45% expense ratio. Morningstar 4 star rated, moderate risk, good volatility measures, dividend increase over time. What am I missing with this one? Seems "too good to be true".
 
Thank you to all who are posting. This is very intriguing to me even though I am 10+ years from retirement. I love the scenario that @COcheesehead discussed on the first page of 30% of their portfolio is CEFs that generate 65% of their income. I am going to start doing the same thing. Dedicating more of my portfolio to these and get the snowball rolling.

I am scanning through CEFconnect looking at funds while researching them on morningstar.
Came across ECAT - BlackRock ESG Capital Allocation Term. 25% dividend with a 1.45% expense ratio. Morningstar 4 star rated, moderate risk, good volatility measures, dividend increase over time. What am I missing with this one? Seems "too good to be true".
The vast majority of the distribution is return of capital so it’s like buying an annuity. Out of the .30 some cent distribution. .017 is from dividends, the rest is your money being handed back to you.
 
PIMCO's March UNII numbers are out and they aren't great, at least for the CEFs that I own

Columns in orange added by me

View attachment 55236
Thanks again Pete. Before imagining that the chart above describes the end of Western Civilization, consider several observations:
1. The chance that NII dropped dramatically in ANY given month is relatively small. Portfolios and their income accruals/cash flows don't change much from month to month, and there has been no change in the repo financing rate save that it dropped a while back. So all else equal, NII should not change much.
2. So what might have made NII drop last month? Two obvious possibilities..,
A. Several SA authors and other observers have noticed that many PIMCO taxables rather dramatically reduced leverage (hence, risk) in recent months --- between 10% and 20%. THAT would have affected NII....But if PIMCO took profits and reduced leverage BEFORE TARIFF DAY and consequently has been/will be able to buy IG and HY assets at now significantly higher yieds, THAT DOESN'T BOTHER ME AT ALL !
B. ANY month REPORTED NII may drop because PIMCO managers strategically paid premiums for off-market swaps or bonds trading above par. Both can reduce NII as those trades move over into swap unrealized profits or higher bond prices --- either of which then appear in NAV.
Bottom line: these earnings/UNII are not very informative and can be misleading.
Regards, Dick
 
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