The market has recovered quite a bit during the last couple of weeks and full 25% up from its lows on March 23. But by no means, we are out of the woods yet. However, a lot of people feel that there's some disconnect between the market action and the unprecedented economic upheaval and uncertainties that have been caused by the spread of Coronavirus. But we must keep in mind the huge amount of stimulus dollars that already have been thrown in response by the federal government and the Fed. The stock market is forward looking, and it's looking beyond the economic shutdown and the positive impact of the damage control measures. However, still, the market may not be accounting for a possible second wave from this virus situation, since the vaccines are not likely to be available at least until early 2021. That said, the picture is never crystal clear, and if it was so, there would be no value left to be found in the market as everything would be priced to perfection. So, it's always a good time to keep your wish list ready, and it probably may be the time to buy in small lots now rather than later.
For income investors, closed-end funds are an attractive investment class that offers high income (generally in the range of 6%-10%), broad diversification (in terms of variety of asset classes), and market matching total returns in the long term if selected carefully and acquired at reasonable price points. However, CEFs come with their own set of risks and challenges that investors should be aware of. We list various risk factors at the end of this article.
Closed-end funds, in general, had performed very well in the last year, until the recent meltdown. The coronavirus-induced health crisis and
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