While the pundits continue to (unsuccessfully) try to call the bottom of this Fed-spooked market, we closed-end fund (CEF) investors are doing what we always do: collecting our 7%+ dividends as we patiently move through to brighter days, notes Michael Foster, investment strategist at CEF Insider.

In fact, we're doing more than that: we're making some careful long-term buys as our fellow CEF investors — a conservative lot if there ever was one — toss out funds that are actually well suited to the higher-rate world we're moving into.

I want to talk about one such fund today: it does something that has a lot of appeal in a market like this — it keeps you invested in the S&P 500, but with a twist: it hands you an outsized income stream that actually grows more stable as volatility picks up.

Of course, we CEF investors know the value of our funds' high payouts: they let us weather a market storm without having to sell shares to supplement our income, a desperate move that we all know shrivels our nest eggs and our income streams.

Pathetically low yields are the main problem plaguing index funds, including the most popular index fund of all, the SPDR S&P 500 ETF Trust (SPY), with its miserly 1.5% yield. Luckily for us, there's a CEF specifically designed to address SPY this problem: the 7.9%-yielding Nuveen S&P 500 Dynamic Overwrite Fund (SPXX).

SPXX is always worth keeping on your watch list and considering buying in volatile times. It holds the same stuff as SPY, so you get S&P 500 stalwarts like Apple (AAPL), Amazon (AMZN) and UnitedHealth Group (UNH), but with a couple key differences.

The first? A dividend that your typical S&P 500 investor can only dream of: SPXX yields 7.9% as of this writing. The other difference comes in how SPXX generates that payout: it sells covered-call options, a strategy that's most effective during market volatility.

Covered calls give the buyer the right, but not the obligation, to buy the seller's stock at a fixed price at a predetermined future date. If the stock fails to hit that price, the seller holds onto it. But no matter how these trades play out, the seller keeps the fee charged to the buyer for this right. These fees enhance SPXX's dividend.

Since the amount of cash SPXX gets for its call options is tied to volatility, more fear in the market means a larger income stream that SPXX can hand over.

Of course, other investors are aware of this, which is why this fund trades at essentially par — a 0.6% discount to net asset value (NAV, or the value of its portfolio) as I write this. But if you think markets are likely to get more volatile before they settle (a good bet, in my view), this could be a good opening for a buy, as another sharp selloff or two could turn the fund's discount into a premium.

Right now, the market is in a panic because the Fed announced a 75-basis-point rate hike, the highest in nearly 30 years and more than investors expected a few weeks ago. The Fed also suggested that more aggressive rate hikes are coming.

That, by the way, does not mean you should wait to buy stocks until March 2023. Remember that the market is forward looking, so March will probably be too late. But what about later this year? That could be the time to buy — or the market could realize the worst-case scenario is already priced in and start recovering next week.

As I said off the top, calling the bottom is impossible (anyone who says they can do so is lying). Which brings us back to SPXX. The fund can keep investors in the market for that recovery while giving them a big income stream to tide them over (and that income stream is bolstered by the fund's income-generating options strategy).

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