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Retirement Soon? Let Us Help

Mar. 03, 2021 3:00 PM ETBMEZ, BSTZ
Please Note: Blog posts are not selected, edited or screened by Seeking Alpha editors.

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  • (1) Identify the most profitable CEF and ETF opportunities.
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  • (3) Avoid the overpriced funds that can sink your portfolio.

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At some point in life, an investor will want to go into retirement. Unless you are lucky enough to receive a large inheritance or receive a financial windfall, then it is very likely you've saved your whole life. Perhaps it was into something like a 401k for most individuals. A 401k is a perfect vehicle for continually setting money aside for when retirement comes. With this, an individual is using a dollar-cost average method. A preferred method to take advantage of peaks and valleys of the market over your life.

Fitting CEFs and ETFs In A Retirement Portfolio

This is one of the greatest things; both ETFs and CEFs can fit in any income investor's retirement portfolio. This is due to their diversified nature, which is able to provide exposure to any asset class or sector you can think of. They are also an excellent fit for being able to meet that income objective that investors have when they are looking for paycheck replacement.

Due to funds' diversified nature and focus on paying out distributions and dividends; they make a perfect fit for income-focused investors. Those would typically include the retired folks that we have been discussing today - although not always!

Another added benefit of their diversified nature is that it really does make them an easy fit in an already diversified portfolio. If one is a dividend growth investor and already holds several individual stocks, adding a broad-based fund should not throw this balance off. I would even say, in my opinion, that an investor can have a portfolio of only CEFs or only ETFs - or both investment options combined.

If you are holding a basket of growth-focused mutual funds or ETFs from a 401k - then the transition to income-focused funds can be easy as well. If in a tax-advantaged account (such as a 401k or IRA) then no tax obligations will hit you with simply selling one and buying into another group.

Heading into retirement, one would be more focused on income. Though we've recently covered why CEFs can be utilized as a way to grow your portfolio as well - and truly can fit any style of investor.

Back to the income focus for this piece though. Our portfolios are delivering on this front. In a big way, with high-yields. They also have been experiencing income growth for shareholders as well! So the market can be as volatile as it wants - our portfolios still grew income through 2020.


Income Generator December 2020 stats

The Income Generator portfolio received a total of $1024 in distributions this month, down from $1094 from last month, as we had swapped from the higher-yielding OXLC to the lower-yielding ECC last month. This monthly distribution is lower than the corresponding period from 2019, due to the lack of special distributions this year. Despite the lack of specials this year, we still grew our income in our portfolio by +11.0% this year (from $11603 to $12882). This highlights the power of "double compounding" from distribution reinvestment as well as our CEF rotation strategy, in allowing minor distribution cuts to be overcome, as well as not stretching for yield. Remember, no new capital was committed to the portfolios at any time.

Performance for 2020 was +9.71%, beating the YYY (-1.20%) fund-of-CEFs benchmark.


Tactical Income-100 December 2020 stats

The Tactical Income-100 portfolio received $1096 in distributions this month, down from $1231 last month. Overall, we've grown our income in our Tactical Income-100 portfolio by about +2% this year ($10117 to $10324). This highlights the power of "double compounding" from distribution reinvestment as well as our CEF rotation strategy, in allowing minor distribution cuts to be overcome. Remember, no new capital was committed to the portfolios at any time.

The income growth here was a bit more tempered because the portfolio added more growth. Primarily, the addition of BlackRock Science and Technology Trust II (BSTZ) and BlackRock Health Sciences Trust II (BMEZ). These lower yielders are balanced more by the opportunity for greater appreciation - which could translate into distribution growth going forward.

Performance for the Tactical Income-100 portfolio came in at +3.15% for 2020, still beating the YYY (-1.20%) fund-of-CEFs benchmark. As a more aggressive portfolio, it takes sector bets and had greater exposure to energy than our Income Generator portfolio heading into 2020.


Taxable Income Q4 2020 stats

The Taxable Income portfolio received $1650 in distributions in 2020 Q4. This is +5.22% higher than the comparable distributions received during 2019 Q4, which totaled $1568.

Over the last 12 months, we've only had one net distribution cut in the Taxable Income portfolio (PMX which cut by -9.3% in January 2020). In contrast, we've had 5 boosts over the last year:

  • MAV which increased by +13.3% in May 2020,+5.9% in August 2020, and another +16.7% in November 2020.
  • FLC which increased by +5.2% in May 2020 and another +9.1% in August 2020.
  • NMZ which increased by +4.2% in June 2020.

We also had two funds (EIM and EVN) which temporarily lowered their distribution in 2020, then brought them back up to levels that are highest in the past 12 months.

The main reason for these distribution boosts has been the fall in short-term rates over the last year, bringing down CEF leverage expenses.

Significantly, the monthly distribution of $552 we've received in December 2020 is the highest since inception of the portfolio. We can see that the income stream of this portfolio has been remarkably resilient during this bear market. Remember, we have not added any new capital to the portfolios either!

Including dividends, the Taxable Income portfolio was up +14.15% in 2020 Q4. For 2020, the portfolio returned 5.41%.


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If you're not satisfied, simply cancel before your 2-week period is over and you won't be charged a single penny.

With an annual membership, you save 25% versus the monthly membership. There's no better time to try us out!

The CEF/ETF Income Laboratory membership normally costs $588 per year (on a monthly plan). That gets you 1000's of research hours conducted on your behalf each year by our team of experts which we share with our members at only a fraction of the cost. Today, you have the opportunity to access a discounted price of $439/year (25% off) by joining us on an annual plan.

All members are grandfathered for life at the membership rate that they signed up at (note: excludes any introductory discounts). So I highly suggest that you lock in the current rate while you still can.

Remember, "time = money", so being able to save hundreds of hours of time of CEF and ETF research each month with what amounts to the price of a cup of coffee every few days is truly an incredible bargain. And our members agree!


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CEF/ETF Income Laboratory: Profitable CEF and ETF Income and Arbitrage Ideas

Whether you're a novice or experienced closed-end fund ("CEF") and exchange-traded fund ("ETF") investor, the "Income Lab" is the right place for you. Our goal is to help you benefit from income and arbitrage strategies in CEFs and ETFs, all without having to be an expert, because we do the heavy lifting for you. If that sounds like something you'd be interested in, we hope you'll consider joining us here at CEF/ETF Income Laboratory.

We would love for you to join us. We are sure that you will enjoy our service and benefit from what we have to offer!


Stanford Chemist, Nick Ackerman, Juan de la Hoz and Dividend Seeker

Analyst's Disclosure: I am/we are long BMEZ, BSTZ.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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