What if there was a way you could tap this market correction to grab the biggest S&P 500 stocks cheapall while hedging your downside and getting a 7.2% dividend yield?
Its not only possible, but you can do it in one single buy. More on that in a moment.
First, Im pounding the table on stocksand in particular funds like the one Ill show you shortlyfor one reason: theres a huge disconnect between the drop in the market that weve seen lately
Investors Miss the Memo
and what S&P 500 companies are telling us.
And that is that far more firms than expected are crushing the Streets forecasts. And better yet, revenuethe lifeblood of profits and the best measure of demand we haveis soaring: up 4.1% from a year ago.
In short, S&P 500 earnings statements are just fine, thank you very much.
Your 1-Click Opportunity to Cash in on Fear
Were going to tap overhyped fears about profits to grab ourselves a 7.2% dividend (with upside) using a key strategy many hedge funds use in markets like this.
Its called positive carry income capture, but dont be thrown by the Wall Streetspeak; its simple: you buy a collection of stocks and draw an income stream from themthen use that income to reinvest during downturns like this one.
This is where the Nuveen S&P 500 Buy-Write Income Fund (BXMX) comes in, because this sturdy closed-end fund (CEF) carries out this strategy for us.
With a 7.2% yield and a 2.2% discount to net asset value (NAV, or the per-share market value of the stocks in its portfolio), BXMX is worth a close lookespecially because markets are volatile, and thats precisely what this fund, known as a covered-call fund, is built for.
More Panic, More Cash
This chart shows the S&P 500 volatility index (VIX) in orange and BXMXs income stream in blue.
Whats the VIX? Imagine a barometer of the total fear in the market, measured by how much investors are willing to pay to insure their stock portfolios. Thats the VIX.
When that barometer goes up, tensions are highbut notice how those moments of elevated tension also mean more income for BXMX? Rising market fears mean a payout raise for BXMX holders.
The way this works is simple. BXMX has two functions: the first is holding shares in S&P 500 companies, such as Microsoft (MSFT), Apple (AAPL) and Visa (V).
The second is selling insurance on the S&P 500 to investors. These funds do this is by selling call options (a kind of contract where the fund agrees to sell shares at a specific price) that limit the funds downside while helping short sellers limit their own losses. When those investors pay more for insurance, BXMX gets more cash, which it then hands over to investors.
Theres a tax advantage to BXMX, as well.
The cash the fund gets from selling this insurance is typically considered capital gains if investors do this individually, but BXMX can structure its payouts so that this cash is considered return of capital, which means its not taxed for many Americans. So far for 2019, 83% of BXMXs dividend has been classified as return of capital, so is tax-free for a lot of people.
(Many folks think that return of capital is simply the fund company returning your cash to you in the form of a dividend, but thats false. Ive written an in-depth article busting that and other myths about return of capital that you can read when you click here.)
Beyond the tax benefits, the appeal of BXMX is twofold: because it takes advantage of investor fears by selling insurance during downturns, its income stream is over three times greater than what youd get from an S&P 500 index fund. This means that moments of higher volatility, like what weve seen recently, are times to buy in and take advantage of the markets woes.
The best part? Investors seem to have not noticed the power of BXMXs income potential.
BXMXs Big Dividend Flies Below the Radar
Even when the market sees a spike in volatility (in orange), BXMXs discount to NAV (in blue) stays rigidly range-bound, despite the fact that this tax-advantaged income stream should be attracting investors left and right. This is a mispricing income-seekers like us can take advantage of.
This Is the Best Covered-Call Fund You Can Buy Now
BXMX is a great covered-call fund, but its not my favorite pick in this too-often-overlooked corner of the market.
My very best covered-call pick, which Ive recommended in my members-only CEF Insider service, yields more (7.4%!) than BXMX and boasts way more upside, thanks to its comically big discount to NAVan outsized 10.6% as I write this.
Im ready to share this fund with you now but it wouldnt be fair to paying CEF Insider members if I revealed this funds name in a free article like this one.
So heres what Im going to do.
When you click right here, youll pull up a special investor report giving you my full CEF-picking strategy and my 5 top CEF buys now (average yield: 8%; expected upside: 20%+). Youll also be able to grab a 60-day trial to CEF Insider with no risk and no obligation whatsoever.
That 60-day trial gives you VIP access to the CEF Insider portfolio, where youll find this must-buy covered-call CEF pick!
To sum that up, youre getting:
Taken together, this is the perfect wealth- (and income-) building package for the markets were seeing today, and its all waiting for you!
Dont miss out. Click right here to get VIP access now, kick-start your 7.4%+ dividend stream and grab your shot at 20%+ price upside today.