Closed-end investment funds are a corner of the securities world of which many investors are unaware. A closed-end fund is essentially the same as a mutual fund except no new money can enter the fund after the initial offering. Shares trade on a regulated exchange at prices more or less in line with the value of the securities held in the fund. Closed-end funds are as varied as the managers that operate them. Some specialize in income-producing securities, others in foreign stocks and bonds, while still others specialize in options-related strategies.

Below we highlight three closed-end funds with good distributions and recognized names behind them.

IN PICTURES: Learn To Invest In 10 Steps

High on Mortgage-Backed Securities
TCW Strategic Income Fund (NYSE:TSI) invests in a wide array of securities, including convertible bonds, preferred shares and high yield debt, among others. The stock is up roughly 250% from 52-week lows set in October of last year.

TSI currently yields 6.2% annually and trades at a 7.33% discount to its net asset value. The 30-year old fund is currently heavily laden with Collateral Mortgage Obligations (CMOs). Indeed, nine of its top ten holdings and more than 90% of the entire fund are devoted to these and other mortgage-backed securities.

PIMCO's Global StockPLUS & Income Fund (NYSE:PGP) has appreciated 150% in the last six months and currently yields a lush 13.70%. The fund is a mix of investment grade bonds and equity index derivatives. Interestingly, over half the portfolio (56%) is invested in just two financial instruments: a FNMA 6% note and S&P 500 index futures contracts.

Floating to Bigger Returns
The fund also apparently sees a rising interest rate environment looming, as a full five of its top ten holdings are floating rate notes (FRNs), securities that remove reinvestment risk from a fixed income portfolio by readjusting yields higher as rates rise.

The fund has paid steady, bimonthly distributions since its inception four years ago.

Boulder Growth and Income Fund (NYSE:BIF) is also concentrated in two core holdings that comprise 30% of the fund's holdings: Warren Buffet's Berkshire Hathaway (NYSE:BRK.A) and WalMart (NYSE:WMT). BIF now trades at a roughly 15% discount to net asset value.

The Wrap
Closed-end funds are another great source of income for investors seeking regular, outsized dividends. But be sure to choose your CEFs prudently and be sure they match your needs. They're as diverse an investment product as they come, and should be investigated thoroughly before any commitments are made. (To learn more, read Uncovering Closed-End Funds.)

Use the Investopedia Stock Simulator to trade the stocks mentioned in this stock analysis, risk free!

Related Articles
  1. Options & Futures

    What Does Quadruple Witching Mean?

    In a financial context, quadruple witching refers to the day on which contracts for stock index futures, index options, and single stock futures expire.
  2. Options & Futures

    4 Equity Derivatives And How They Work

    Equity derivatives offer retail investors opportunities to benefit from an underlying security without owning the security itself.
  3. Stock Analysis

    Analyzing Altria's Return on Equity (ROE) (MO)

    Learn about Altria Group's return on equity (ROE) and analyze net profit margin, asset turnover and financial leverage to determine what is causing its high ROE.
  4. Investing News

    Icahn's Bet on Cheniere Energy: Should You Follow?

    Investing legend Carl Icahn continues to lose money on Cheniere Energy, but he's increasing his stake. Should you follow his lead?
  5. Stock Analysis

    Analyzing Google's Return on Equity (ROE) (GOOGL)

    Learn about Alphabet's return on equity. How has its ROE changed over time, how does it compare to its peers and what factors are driving ROE for the company?
  6. Investing News

    Is Buffett's Bet on Oil Right for You? (XOM, PSX)

    Oil stocks are getting trounced, but Warren Buffett still likes one of them. Should you follow the leader?
  7. Options & Futures

    Five Advantages of Futures Over Options

    Futures have a number of advantages over options such as fixed upfront trading costs, lack of time decay and liquidity.
  8. Investing News

    Chipotle Served with Criminal Probe

    Chipotle's beat muted expectations and got a clear bill from the CDC, but it now appears that an investigation into its E.coli breakout has expanded.
  9. Stock Analysis

    Analyzing Sprint Corp's Return on Equity (ROE) (S)

    Learn about Sprint's return on equity. Find out why its ROE is negative and how asset turnover and financial leverage impact ROE relative to Sprint's peers.
  10. Stock Analysis

    Why Alphabet is the Best of the 'FANGs' for 2016

    Alphabet just impressed the street, but is it the best FANG stock?
RELATED FAQS
  1. What is a derivative?

    A derivative is a contract between two or more parties whose value is based on an agreed-upon underlying financial asset, ... Read Full Answer >>
  2. What is after-hours trading? Am I able to trade at this time?

    After-hours trading (AHT) refers to the buying and selling of securities on major exchanges outside of specified regular ... Read Full Answer >>
  3. Do hedge funds invest in commodities?

    There are several hedge funds that invest in commodities. Many hedge funds have broad macroeconomic strategies and invest ... Read Full Answer >>
  4. How do hedge funds use equity options?

    With the growth in the size and number of hedge funds over the past decade, the interest in how these funds go about generating ... Read Full Answer >>
  5. Can mutual funds invest in options and futures? (RYMBX, GATEX)

    Mutual funds invest in not only stocks and fixed-income securities but also options and futures. There exists a separate ... Read Full Answer >>
  6. How do dividends affect retained earnings?

    When a company issues a cash dividend to its shareholders, the retained earnings listed on the balance sheet are reduced ... Read Full Answer >>
COMPANIES IN THIS ARTICLE
Trading Center