We have an investment priced near $10 per share and pays $1.044-per-share annually in dividends, notes Steve Mauzy, editor of Wyatt Research's Personal Wealth Advisor.

It pays its dividends in monthly installments of $0.087 per share. It has paid that amount for nearly 15 years. It doesn’t grow, but it holds its dividend steady.

The Cohen & Steers Closed-End Opportunity Fund (FOF) is that investment. It is a fund-of-funds that invests in other funds — both CEFs and exchange-traded funds (ETFs). It owns 113 in total. The funds are diversified across asset class and investment strategy. Modern portfolio theory tells us that diversification reduces risk.

You may lack familiarity with CEFs. They are niche investments. Only 3% of fund money is allocated to CEFs. Lack of familiarity shouldn’t deter you. CEF shares trade like regular common shares on the major exchanges. They are liquid. You can buy and sell during the trading day. In this way, they resemble ETFs.

But CEFs differ from ETFs in one important way. A CEF’s share price can diverge from the value of the underlying investment portfolio. Sometimes the shares will trade at a premium, many times at a discount. At times, your investment dollars will enable you to buy a portfolio of assets for less than par value. 

Price relative to value is another eye-catcher. If the relative discount is greater than the historical average discount, a buying opportunity could be emerging. If the relative discount exceeds the historical average by a wide margin, a buying opportunity has likely emerged. 

The Cohen & Steers shares trade at a 4% discount to NAV, which is unusual. They typically trade at a premium. Cohen & Steers shares have traded as high as a 6.4% premium to NAV. The average is a 1% premium. The 4% discount is big relative to the premium that has existed in recent history. Overall, with exceptional value, yield, and income, we rate FOF a “buy” today.

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