Investing In Closed-End Funds: Trading In And Out Of ETO

Mar. 4.13 | About: Eaton Vance (ETO)

First and foremost, investing as a whole should be fun and possibly a rewarding experience. This of course is easier written than done. The first headwind that we investors face is life. Life's unexpected surprises, challenges, and the biggest threat to gains, emotions, are just some of the obstacles in our investment lives.

Successfully investing in individual stocks is tough to do for a newcomer all the way up to the likes of Warren Buffett. However, history has shown us that there are many that excel at it and love it. Today I'd like to go over a few ideas of trading and / or investing in these closed end stock funds. Unlike a stock, this CEF (closed end fund) is inherently less risky because of the diversification factor. However, there are other types of risks in considering investment in a CEF, such as performance, management, expense ratios, market price demand, and discount vs. premium.

Don't fight the Fed is what most of us are hearing or reading these days. Money has in flowed back into the stock market playground, real estate and other assets. Income investors, including myself, are always looking for ways to pump up their accounts in a safer manner and always looking for deep discounts to sleep better at night. One of my recent trades was Eaton Vance Tax-Advantaged Global Dividend Opportunities Fund (NYSE:ETO). Despite the higher expense ratio of 1.78%, it seems to be in demand because it invests in large capitalized corporations and trades at a discount of over 8%. The tax advantaged wording too may give this CEF the kicker in stock appreciation for the prudent investor. This CEF isn't one of my favorites mainly because of the higher expense ratio; however I don't mind trading it. When I look for a CEF that I want to buy, accumulate and hold, it would have to be a 1.25% total expense ratio or lower. The lower the better!

There are plenty of Closed End Funds out there to choose from, and I'll be narrowing them down to the ones that I'd be trading or accumulating in for the future. If the discount is deep enough, expense ratio low and the NAV (net asset value) performance there, it may be a good idea to buy them. The fund has holdings of well known U.S. companies such as International Business Machines (NYSE:IBM), AFLAC (NYSE:AFL), Microsoft (NASDAQ:MSFT), Apple (NASDAQ:AAPL) and Chevron (NYSE:CVX) according to its website. Buying a stock fund helps reduce the volatility that can be associated with owning an individual stock. With this fund you get some international exposure as well, which is imperative to a properly diversified portfolio. It also has increased its monthly dividend to .135 from .1167 which yields over 7% in association with the market price and seems to be managed well. In today's ultra low interest rate environment, a yield of 7% is not too shabby.

Disclosure: I am long MSFT. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: I may trade in and out of these stocks frequently.