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One Quick Trade for an Extra $850 a Month

When the Fed's "no taper" surprise sent stocks soaring to new all-time highs, it also sent bond yields plunging and bond prices soaring, as traders scrambled to cover short positions.

In fact, Treasury bonds had their biggest daily price gain in more than two years on Wednesday, Sept. 18, the day the Fed let the air out of the taper expectations. And while a drift lower in long-term interest rates (i.e., bond yields) could continue for a bit longer, there is no doubt that over the course of the next year, interest rates will rise.

So here's the smartest thing you can do right now:

Take advantage of the rally in bonds by selling bonds… and any of the "bond proxies" listed below, including utilities. Then, move the proceeds into one of the four investments I'm about to show you.

They'll give you much better long-term growth potential. And they'll send you a ton of cash, too – up to $850 a month, depending on how much money you put in.

Here's what makes these "specialty funds" so special…

They Do the Work, You Get the Money

Eventually, the Fed will rein in its bond-buying program, and anyone holding traditional income assets such as bonds or "bond proxy" sectors – preferred stocks, utility stocks, and mortgage REITs – will once again be left wondering what happened to their so-called "safe" investments.

To counter this situation, we need to look to non-traditional methods of generating income. And one way to do that is with "buy-write" funds, also known as "covered-call" funds.

Buy-write funds are basically either closed-end mutual funds or exchange-traded funds that employ a covered-call options strategy. They trade just like stocks on an exchange, and that makes them easy to access in your brokerage account with just one click.

In the current upward-drifting market, I think selling covered calls is one of the best ways to generate income and supersize your total return. But for many investors, playing the options game is a bit uncomfortable. And while a covered-call strategy is both low risk and high probability, for some the idea of selling options in their account is a little too daunting a proposition.

Buy-write funds essentially eliminate the trepidation associated with writing your own calls, because here the fund managers do the trading for you. So all you have to do to begin collecting the same kind of income from writing your own covered calls is to buy one or more of the many outstanding buy-write funds available today.

Here are four to consider:

Join the conversation. Click here to jump to comments…

  1. john gately | September 30, 2013

    What is the management fee for these covered call funds?

  2. Dawn | September 30, 2013

    $100,000 at the highest yielder of the funds named would be $9000 per year or $750 per month. Without capital appreciation, where does the $850 come from?

  3. David | September 30, 2013

    How about OAK? Yields 11% at todays price and made money during the 2008-09 crash.

  4. Brian | September 30, 2013

    Here's what Robert Hsu is not teling you:
    Those funds are not so great when the stock market is on a roll. They have built in flaws. They have a habit of selling assets to maintain high distributions. That leaves them with less money to buy winning stocks, so, investors in those funds miss out on much of the bull market. To manufacture income, covered call option funds sell options against their stocks. In a rising market, they have to sell their shares, as the shares advance.

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