A Dollar for Fifty Cents: Proven Strategies to Outperform the Market with Closed-End Funds. 2025. Michael Joseph. IW$ Press
Closed-end funds (CEFs) are “chronically mispriced by the market,” writes Michael Joseph, CFA, but for investors hoping to capitalize on that inefficiency, “simply buying a closed-end fund trading at a discount isn’t enough.” Just picking the funds with the deepest discounts to net asset value (NAV) or the highest yields, adds Joseph, is a “recipe for disaster.”
He further cautions that investing in a CEF in hopes that an activist investor will swoop in and close the gap between NAV and market price is “risky” and “speculative.” Furthermore, says the Deputy Chief Investment Officer at Stansberry Asset Management, purchasing a CEF when it is initially offered is “irrational.” He also points out that when the Fed aggressively raised interest rates in 2022, several leveraged municipal bond CEFs’ valuations were slashed nearly in half.
By thus dispelling expectations of easy money, the author of this 89-page book corrects any misapprehensions that might be induced by his title, A Dollar for Fifty Cents. That phrase also appears in a subheading of a section recounting how Warren Buffett and Charlie Munger’s purchase of 20 percent of the shares of Source Capital after the 1969-1970 market downturn drove the CEF nearly 50 percent below the value of its underlying assets.
Buffett and Munger ultimately doubled their money, but as Joseph remarks in an understatement about discounts to NAV, they “aren’t always as steep as 50%.” In a fairer representation of the actual opportunity set, he cites research showing that the best CEF strategy is to buy at a 20 percent discount, with the objective of selling when the discount narrows to 15 percent.
