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Using Discounted Closed Ended Funds designed to Increase Inc |
Currently focuses on: Cohen & Steers Select
Utility Fund (nyse:UTF)
Its investment objective is to
achieve a high level of after-tax total return through investment in
utility securities. In pursuing total return, the Fund equally
emphasizes both current incomes, consisting primarily of
tax-advantaged dividend income, and capital appreciation. Under
normal market conditions, the Fund will invest at least 80% of its
managed assets in a portfolio of common stocks, preferred stocks and
other equity securities issued by companies engaged in the utility
industry.
The Utility and Electrical industry is forecasted
to grow at 8.5% for then next 5 years.*
Currently the Cohen
& Steers Select Utility Fund is at a 16.89% discount.
That
means for every $100,000 invested in principle you invest roughly
only $83,000.
Using regression to the mean* theories
believing that historical mean for US based closed end funds
historically trade at a 5% discount we would forecast Cohen & Steers
Select Utility Fund would increase in principle about 12 percent
assuming no change in the market value.
** Regression to
the mean is a technical term in probability and statistics. It means
that, left to themselves, things tend to return to normal levels,
whatever that is.
Cohen & Steers Select Utility Fund has a
short but profitable history of growing principle.
The
current income from this fund is 6.14%
We believe due to
the fact you could buy 100,000 dollars of income producing utilities
that produce over 5% income or over $5,000 dollars per year for
around an investment of $83,000. Those how invest with the much
lower amount of $83,000 still has the same income of over $5,000
giving a much higher income of 6.14%
Performance:
?If you're patient, buying funds at a steep discount can be
extremely lucrative? For example, suppose you divided the closed-end
universe into fifths, starting with the most expensive. The priciest
20 percent gained 48 percent in the past five years. The 20 percent
with the steepest discounts, however, soared 160 percent.?***
To Reduce Risk
With an effort to reduce the risks
associated with closed ended funds at deep discounts with high
income we recommend diversification using many different asset
classes and fund families utilizing asset allocation approach. In
our growth and income model we use 7 different asset classes to
provide a balanced portfolio. This structure was designed to
minimize fluctuations. An event that might hurt one class of
investments might benefit another. Two examples of this is after the
9/11 terrorist attack and the 2000 stock market crash. In both cases
the stock market had a tremendous sell off, but the high grade bonds
had very large rallies. During those two events the stock market and
high grade bonds had no correlation. Many experts believe
diversifying between non-correlated asset classes is the single best
way to reduce volatility risk.
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