It’s like buying an ETF (but with an 8% dividend)

On the surface, invest in an index fund sounds great. It’s simple, cheap and, as you’ve probably heard again and againfew active managers beat their benchmarks anyway.

But we closed-end fund (CEF) investors know best. The truth is there is a lot CEFs there that beat their benchmarks while throwing healthy dividends north of 8%.

And when you step out of the world of equities, into areas like corporate bonds, REITs, and municipal bonds, the best benchmarks are Standard with CEFs. This is because these markets, which are much smaller than the stock market, offer a shrewd manager many advantages, such as a well-stocked contact book, that a “robotic” index fund simply cannot match.

But today I want to talk about Equity EFCs. In a moment, I’ll show you one that has crushed the S&P 500 over the past decade – and the gap is widening! Additionally, this underrated fund pays a dividend of around 8% on average over the long term.

I think you will agree that this is a much better way to invest than through an index fund like the Vanguard S&P 500 ETF (VOO).— especially since the average index fund is only paying 2.1% today.

Forget to beat the index, even Corresponding to It’s a godsend with the CEFs

Before you get to this fund, consider this: even if you can just match an index with a CEF, you are always one step ahead, as you get most of your dividend in cash, rather than “paper” earnings. And we’re happy to take money these days, with banking crises and an unpredictable Fed rattling the markets.

Consider, for example, a CEF called the General Society of American Investors (GAM), which has well-known names like Microsoft (MSFT), Berkshire Hathaway (BRK.A) And TJX Companies (TJX). Over the past three years, its total return (including dividends) has matched that of the market.

The main difference between it and VOO? The dividend: over this period, GAM yielded an average of 8.3%.

(GAM, in fact, returns its earnings as dividends by design – it aims to generate all income and capital gains from its portfolio in a given year through its dividend, which it distributes primarily as a single payment at the end of the year.)

Of course, VOO got more or less the same return, but since investors were getting less than 2% return during their holding period, they had to time the market not to sell at a loss in order to generate cash that they could use, in addition to dealing with the headaches, taxes, and paperwork of juggling capital gains and income.

This is in stark contrast to GAM shareholders, who simply dump dividends into their accounts.

How about beating the index?

Now let’s get back to that fund I talked about earlier—the Adams Diversified Equity Fund (ADX), a fund that the members of my CEF Insider service will recognize. ADX’s portfolio is populated by strong S&P 500 companies such as Alphabet (GOOGL), Visa (V) And UnitedHealth Group (UNH). The fund has beaten the index for a decade.

This trend started around the time CEO Mark Stoeckle joined Adams, bringing a new approach to ADX that saw its performance skyrocket. By focusing on large-cap technology companies that had become high-value players, such as (AMZN) And Alphabet (GOOGL), he weighted the portfolio towards high-growth stocks when they were undervalued. (Plus, Stoeckle is one of the nicest people in the CEF game, in my opinion, and has the loyalty of his employees.)

ADX is currently trading at a steep discount that has temporarily widened due to the issues at Silicon Valley Bank and Credit Suisse, although both of these situations are now resolved (and ADX was not exposed to either).

With an average return of 8% over the past decade – similar to GAM (and a similar dividend policy) – ADX is a consistent income generator and one of many great CEFs that give you above-market returns and significant revenue streams.

Michael Foster is the Principal Research Analyst for Opposite perspectives. For more revenue ideas, click here for our latest report »Indestructible income: 5 advantageous funds with stable dividends of 10.2%.

Disclosure: none

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