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Old 05-09-2016, 06:38 PM
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This OP is c0ckhead of the year.

Such funds are special setups that cater to niche US investors to lower effective total tax rate compared to just buying direct.

In Sg we have no withholding, capital gains, cross-balancing or income tax credits. He end up donating 30% of capital gain to the US treasury vs invest normally and paying 15% standard tax on liquidation.

Originally Posted by Unregistered View Post
The eaton fund you are buying does not pay out dividend of 10% yield (i.e. 7% net). What it does is buy into some dividend stocks then sell call options of the underlying securities and payout the dividends + option proceeds to investors.

The drawback of this technique is that it will never get capital appreciation from the underlying securities as anytime the stocks go above strike the option holders will exercise their rights and the fund will be forced to liquidate at lower price. However when the price of the underlying stocks go down, the fund has no counter balance in hedges and will absorb the full write downs.

Long term effect is you have high dividends and deprecating unit price. The fund has dropped by close to 60% since inception due to falling NAV. Out of the 10% yield, I estimate only ~3% are real dividends, the remaining is just round about capital returns. This is not something newbies with little money should be buying.

My 2c.
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