Vanguard is the proverbial 500-pound gorilla in the index fund business. Any offering they come up with is bound to be a contender. At the very least, it's worth looking at.

It gets more interesting when the company sold short pays a dividend. When you short a stock, you have to pay the dividend. If the dividend yield happens to be significant, this becomes a burden on a short position.

To try to capitalize on this predicament, I ran a screen (on the MSN screener) looking for companies with a short ratio of 25 or more, yielding 3% or more, and with a market cap of at least $1 billion. The screen produced the following 10 results:

"Really weird - and naive comment! Every study I have ever seen of the stock market's biggest winners historically (studies by Wm O'Neill, Ken Fisher, ThinkEquity, etc., etc.) show those stocks usually had nil or no dividends. You shouldn't apply value stock measurements to growth stocks. I used to be a research director at a large investment firm, and I'd FIRE any analyst who made such a comment!"

My answer to this question is: It's worth 0. zero. zilch. bupkis. nada. You get the picture.

An important factor that needs to be considered when evaluating securities is their tax consequences. Roughly ½ of fund investments reside in a qualified account, however, this still leaves the other ½ vulnerable to inefficient tax managed funds. It should be noted that when comparing the yields of closed-end funds to the PowerShares Financial Preferred Portfolio (ticker PGF), one of the main filters in determining which securities are eligible for inclusion in the fund is that the dividends paid by the preferred stocks must be 100% qualified dividend income eligible. This significantly improves the after-tax yield of PGF in a taxable account, which is what investors are ultimately concerned with, as this is how much ends up in their pocket. Also, while closed-end funds can offer some upside appreciation potential when purchased at a discount, they are also subject to the risk of trading at an even greater discount to their NAV. Exchange-traded funds however, tend to trade at or near their NAV prices as specialist are able to create and redeem shares with the fund in larger blocks of 100,000 shares. This helps to address the supply/demand of shares and helps ETFs to trade much tighter to their NAVs.

First of all, thanks to Josh for his input. The two main points that he brings up are the issue of the qualified dividend tax break, and the fundamental difference between ETFs, which have virtually zero divergence from NAV, and CEFs which can diverge from NAV a good deal.

While I accept this criticism as a matter of principle - it is unfair to compare leveraged and unleveraged funds, the latter fighting with one proverbial hand tied behind their backs - I don't think this is a huge factor in this case. The recent Bill Gross comment shows that leverage (especially as little as 35%) doesn't get you that much extra juice these days.

Using the information available on their website (particularly the full roster of holdings), I fetched for each holding its annual coupon rate, credit rating (both figures accessible through the excellent, and free QuantomOnline.com) and last closing price (Dec. 4, through Yahoo! Finance). My goal was to come up with a weighted average yield for the fund, as well as its overall credit quality.

I've posted about a previous investment outlook newsletter of his, and his latest is about as grim. But grim as he may be, his writing is seldom dull and never useless. In this month's installment he shows us how the ability to leverage for extra return is much more limited than it used to be. The lesson I take form this as an income investor, is to be wary of closed end funds that are leveraged to the maximum, taking on a lot of risk for very little extra yield.

Take for example Intel (INTC), a company that recently announced a 12.5% dividend hike. Even after this impressive percentage increase, the stock yields (on Friday's closing price of 22.1) a modest 2.04%. This is not the kind of number that makes you go "Oh!", but Intel nevertheless is a solid dividend investment.

In the end, you can only own the usual large-cap suspects (Microsoft, GE, Citigroup etc.) in so many ways. To let Blackrock own some for you, at a better than 10% discount, doesn't seem like such a bad idea to me. The only problem is, as the reader pointed out, the extra fees.

The fund holds a mix of preferred and common stocks (about 60/40), mainly in the utilities sector. It trades at a whopping 15.8% discount, and has a long track record (since its inception in 1990) of generating solid total return figures, at least where the NAV is concerned. As recently as 2004 it has traded at a premium, and very rarely has it sold for this kind of discount.

There's nothing new about this, and I wouldn't bring it up if it weren't for an original recommendation made in the article, by Bill Schultheis of Pacific Asset Management. According to him, an investor only needs 3 funds in her portfolio: Vanguard Total Market (VTI), iShares MSCI EAFE Value Index (EFV) and iShares Lehman Aggregate Bond (AGG). Put one third of your money in each - says Schultheis - and "get on with your life."

Buy-and-hold investing is just like that, in a way: Anyone can just buy securities. The holding (or as Tom Petty put it, the waiting) really is the hardest part.

Here's a company that generates positive cash flow and uses the cash well. They pay a dividend and grow it consistently. They buy back shares and they make what I consider to be sensible acquisitions, like the recent Radica deal, to improve their already impressive portfolio of toy brands.

Where is the Yield? submits: Legg Mason just announced that they were renaming the Salomon Brothers Emerging Markets Debt Fund (ESD). The new name will be "Western Asset Emerging Markets Debt Fund," and so this closed-end fund, once a part of the Citigroup family, will shed the name that connected it to its previous owner.

The fund itself looks like good value here. The portfolio includes a better-than-average quality mix of emerging market debt, out of which the governments of Brazil,Russia and Mexico each take up roughly one fifth of assets. According to the most recent S&P report effective average duration is just over 3 years and credit quality averages BB+, with over 52% of assets rated investment grade. Management fees amount to a reasonable 1%, and the current yield on share price is 6.87%. The fund achieves this figure without leverage.

Where is the Yield? submits: Investors who own Chiquita Brands International Inc. (CQB), Ford Motor Co. (F) or Pier 1 Imports Inc. (PIR) recently learned the hard way that regular dividends are not guaranteed to grow, or indeed to even be maintained at their current levels. When companies get into cash trouble, your dividends are in grave danger. When that happens, you want to bail before the news about the dividend cut hit the wires.

The dividend cut is the proverbial other shoe, and its drop can almost always be anticipated. One key indicator investors should always look at is credit rating. A company that borrows money at junk rates, only to pay some of it to shareholders, is not likely to keep this losing practice up for long. Apart from the credit rating itself, you should always watch the trend: A company that is getting downgraded by the Moody's and Fitches of this world, or even gets placed on negative outlook, is usually heading in the wrong direction.

For those of you who are not familiar with the magic formula, here's a quick summary: Greenblatt wants to buy excellent companies (i.e. ones that have high pre-tax return on capital) at a cheap price, which he measures by pre-tax earnings-yield - the higher the better.

A look at the fund's Investor Guide tells us a few interesting things about it. First, it tells us that they measure themselves against the DJ Select Dividend index, which means that they aim to compete directly with iShares Dow Jones Select Dividend ETF (DVY) -- hence the ticker symbol. It's obvious that they want a piece of the $6 billion plus pie that the DVY has in assets. The question is: Should they get it?

My take on the subject is this: We don't need many of the funds being offered, but that doesn't mean that all the usable ETFs have already been introduced. The ETF industry has a long way to go still. It just needs to go in the right direction.

The underlying holdings of the latter two are almost identical, so it's not surprising to see their performance has been just about the same. They have both been outperformed by the Wilshire index, which has a somewhat different weighting of various REITs.