Let's debunk a CEF myth called "return of capital," or ROC, that has caused many investors to miss out on the sustainable high income potential of closed-end funds. ROC is often misunderstood as a negative aspect, but it can actually be a strategic distribution method that enhances overall returns.
The best closed-end funds have the potential to significantly boost your portfolio income. Unlike traditional open-end funds, closed-end funds trade on stock exchanges and can be bought at a discount to their net asset value (NAV). This allows investors to not only benefit from high yields but also acquire the underlying stocks and bonds of the fund at a favorable price.
Closed-end funds can be particularly advantageous in volatile markets. The high yields they offer can act as a cushion, providing a stable income stream even when other investments may experience significant fluctuations. This stability can be attractive to income-focused investors looking for consistent returns.