![]() ![]() NAV is derived from the prices of all the fund’s holdings. When you buy or redeem an open-end mutual fund, the price is always the net asset value (NAV) per share. Furthermore, our BUY, HOLD, and SELL ratings reflect the fund manager’s financial performance record. Income Securities Investor also provides such details as the fund’s CUSIP and its schedule for dividend payments. The table displays data for each fund on the metrics described below. In addition to the selection criteria already discussed, several other factors influence my closed-end fund recommendations. Download Five Dividend Stocks To Beat Inflation, a special report from Forbes’ dividend expert, John Dobosz. With inflation running at 3.0%, dividend stocks offer one of the best ways to beat inflation and generate a dependable income stream. A substantial portion of the volatility of funds’ underlying bonds arises from the basic relationship regularly repeated in reporting on the credit markets-when yields rise, prices fall. Like the fund with the lowest volatility (IGHG), its investment strategy includes hedging of interest rate risk. ![]() This is the category otherwise known as “high yield,” or in the media’s favored but disparaging term, “junk.” HYHG is not deemed suitable for low-risk portfolios, yet it has the group’s second lowest volatility. The below investment grade (BIG) corporate fund shown in the chart breaks the pattern, however. ![]() Not surprisingly, the investment grade (IG) corporate bond funds, deemed suitable even for low-risk portfolios, are less volatile than the funds in the municipal bond and emerging market categories, which only medium-risk or high-risk investors should consider owning. Volatility, as measured in the table’s last column, is defined as standard deviation of monthly prices over the five years ending on June 30, 2023, as a percentage of average price during that period. Risk is also a function of how widely a fund’s price swings in response to both general market fluctuations and ups and downs in the fund’s financial results. That is essentially what is reflected in credit ratings, such as those assigned to the bonds held by the fund by Moody’s, Standard & Poor’s and Fitch Ratings. Risk does not consist solely of the possibility of permanent loss of principal. (Note: You should consult your tax advisor when investing in bond funds.) A Closer Look At Risk Therefore, yields on funds that invest primarily in tax-exempt municipal bonds should be compared with after-tax equivalents of yields on funds that invest mainly in taxable bonds. Corporate bond funds’ income, on the other hand, tend to be taxed largely at ordinary income rates. Much of municipal funds’ income is exempt from income tax (although there are also funds, none of which are included in the table above, that specialize in owning taxable municipal bonds). It is important, in comparing the bond funds’ yields, to consider differences in tax treatment. Observe that the table’s investment grade corporate funds, which are suitable for low-to-medium-risk portfolios, yield less than the below investment grade corporate fund (HYHG), which is suitable only for high-risk portfolios. Investors who take relatively high risk are generally rewarded with relatively high yields, although capital preservation is typically less certain than with low-to-medium-risk closed-end funds. ![]()
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