Income Funds at a Discount

Our picks for closed-end stock and bond funds should appeal to yield-starved investors.

In today's low-interest-rate world, we think it's high time to take another look at closed-end funds. Many of these funds, which trade on exchanges as stocks do, use borrowed money and options, among other strategies, to pump up yields, making them ideal for income-hungry investors.

The closed-end format provides fund managers with other advantages. Because shareholder cash doesn't generally flow into or out of a closed-end fund after its initial public offering, a manager can invest for the long term and doesn't need to keep low-yielding cash on hand to meet potential redemptions. This stability is particularly well suited to investing in volatile asset classes, such as emerging-markets stocks.

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Contributing Writer, Kiplinger's Personal Finance

Andrew Tanzer is an editorial consultant and investment writer. After working as a journalist for 25 years at magazines that included Forbes and Kiplinger’s Personal Finance, he served as a senior research analyst and investment writer at a leading New York-based financial advisor. Andrew currently writes for several large hedge and mutual funds, private wealth advisors, and a major bank. He earned a BA in East Asian Studies from Wesleyan University, an MS in Journalism from the Columbia Graduate School of Journalism, and holds both CFA and CFP® designations.