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Tax implications of high-yield dividend ETFs can significantly affect net income. High-yield distributions may be taxed as ordinary income, often resulting in higher rates than those for long-term capital gains. This makes recognizing the form of dividend income and its tax consequences essential for constructing a tax-efficient investment strategy.
The Risks in Leveraged Closed-End Funds
Closed-end funds (CEFs) are often more volatile due to their use of leverage, which can magnify both gains and losses. Many focus on high yields often generated through destructive return of capital, leading to potential reductions in NAV over time. As such, these funds can pose significant risks requiring thorough due diligence.