Book Review: A Dollar for Fifty Cents – CFA Institute Enterprising Investor

A dollar for fifty cents: proven strategies to outperform the closed-end fund market. 2025. Michael Joseph. IW$ Press

Closed-end funds (CEFs) are “chronically mispriced by the market,” writes Michael Joseph, CFA, but for investors hoping to profit from that inefficiency, “simply buying a closed-end fund that trades at a discount is not enough.” Simply choosing the funds with the biggest discounts to net asset value (NAV) or the highest returns, says Joseph, is a “recipe for disaster.”

He further warns that investing in a CEF in the hope that an activist investor will dive in and close the gap between intrinsic value and market price is “risky” and “speculative.” Furthermore, says the Deputy Chief Investment Officer at Stansberry Asset Management, buying a CEF when it is initially offered is “irrational.” He also points out that when the Fed aggressively raised rates in 2022, several leveraged municipal bond CEF valuations were nearly cut in half.

Thus dispelling expectations of easy money, the author of this 89-page book corrects any misconceptions that might be caused by its title: A dollar for fifty cents. This phrase also appears in a subtitle of a section recounting how Warren Buffett and Charlie Munger’s purchase of 20 percent of Source Capital’s stock after the 1969-1970 market downturn left the CEF nearly 50 percent below the value of its underlying assets.

Buffett and Munger eventually doubled their money, but as Joseph notes in an understatement about discounts to NAV, these are “not always as high as 50%.” In a fairer view of the actual odds, he cites research showing that the best CEF strategy is to buy at a 20 percent discount, with the aim of selling when the discount drops to 15 percent.

A dollar for fifty cents is written to be accessible to non-professional investors, but provides information and insights that can benefit professionals who are new to CEFs. Joseph summarizes the extensive literature on what academics consider the puzzle of why a CEF would ever trade at less than the value of its assets. He discusses the relatively recent emergence of CEFs with specified end dates. That structure is intended to ensure that holders can collect their funds at NAV at a known time in advance, but Joseph notes that termination dates “can often be extended for various reasons.” He also informs investors about free screening sites that can assist in CEF selection. Also useful are his warnings about funds with names that do not accurately describe their actual investments, as well as the misleading distribution rates shown on some CEF fact sheets.

As for the subtitle of the book: Proven strategies to outperform the closed-end fund marketJoseph points to several studies that have found superior returns for CEFs. However, readers hoping for a contemporary, proven and index-setting management record based solely on CEFs will be disappointed. They’ll have to settle for Blue Ridge Capital foreword writer Rich Bello’s statement that his firm “earned great returns” and “invested in more than a few CEFs.”

However, many money managers agree that closed-end funds can play a constructive role in investment portfolios. An important application is to provide diversification within an income-oriented portfolio that also includes assets such as bonds, preferred stocks and REITs. CEFs that increase their distributions over time help income-oriented investors keep pace with inflation despite substantial allocations to fixed income securities. Investors pursuing such a strategy will benefit greatly from Michael Joseph’s balanced discussion of the virtues and pitfalls of CEFs.

All posts are the opinions of the author. As such, they should not be construed as investment advice, and the opinions expressed do not necessarily reflect the views of the CFA Institute or the author’s employer.

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