Despite Its 13.7% Yield, This Fund Looks Risky Right Now
The recent dividend cut at the Brookfield Real Assets Income Fund (NYSE: RA) led to a significant fall in the share price and called into question the sustainability of dividends in many closed-end funds. As such, I decided to look at one of them, the Guggenheim Strategic Opportunities Fund (NYSE: GOF), to help illustrate what investors should look for before investing money. Here's the lowdown and why some look like risky investments right now.
It's not hard to see why closed-end funds are attractive to investors. Not only do many of them come with mid-teens yields right now, but they tend to invest in a myriad of assets, which helps diversify risk. Fund shares are listed on stock exchanges and have varying degrees of liquidity. In addition, closed-end funds can use leverage to attempt to generate outsized returns and dividends for investors.
Still, there's no reward without taking risks, and as investors in the Brookfield Real Assets Income Fund discovered recently, closed-end fund distributions are not set in stone. It makes sense to spend a little time looking at publicly available information before buying into one.
Source Fool.com
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