How will closed end funds react to a market correction?

I have several closed end funds (CEFs) paying decent dividends. How will CEFs fair if the market enters a prolonged and substantial correction?

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May 2017
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They will decline, but depending upon their dividends and makeup, may hold up better than the overall market.  If you are concerned about how much they could decline, go to a chart of 2008 & see how your particular CEFs performed.  You can do this during a few different downturns and that will provide clues.  But also look at your CEFs during a rising interest rate period.  This is because rising interest rates are one of the biggest risks to many CEFs that are income oriented holding preferred stocks.  This is because preferred stocks trade more like a bond than a stock and thus are very interest rate sensitive.

Hope this helps and best of luck, Dan Stewart CFA®

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