@hank, I used to own fixed income CEFs until sometime in 2021. After that I switched to trading them but not regularly as fixed income volatility has been high. Except for MLP CEFs, the only equity CEFs I ever owned are preferred stock CEFs which I treat as fixed income CEFs, but I have not owned preferred stock CEFs after 2020. Currently, I own the MLP allocation CEF, converting to fixed income CEF, PDX - but it is so small in my portfolio, after selling to buy another fixed income CEF, that it is not worth mentioning either. Now, I have difficulty with fixed income without leverage and so, fixed income CEFs in size would be too distracting for me. My hats off to folks that own levered fixed income CEFs (and MREITs) in an inverted yield curve environment.

I can't imagine any 14% payout without a hefty ROP component. Or maybe a Bernie Madoff component.

I don't own XLK, so that is 0.00% for me.
But I do hold LC-growth and MSFT, NVDA, APPL are top stocks in those funds.
These 3 are also top stocks in SP500 accounting for 20% of SP500.
So, this shift of about $11 billion in the next few days may have a notable effect on LC-growth and/or the market.
Posters are free to skip - XLK is in the title.

Added to PDI for income.

Hey @Mark,
I have never owned a CEF and noticed that PDI has a high distribution ratio, 14.23% per M*. Is this payout ratio the result of leverage employed by the fund and does it also include return of principal?

@hank,
Unless I have a longer view, I do not hold CEFs past the day before the ex-div date. This month I sold some even on ex-div minus 2 days, which is not common for me. I sell mostly on ex-div minus 1 day.
One of the ones I sold, sold off heavily into the close the day before ex date but that was a good buying opportunity if you were willing to hold overnight and have a neutral macro view so you do not wake up next day looking at further price loss.
I have heard many people buy on purpose the day before ex-div date to capture dividends. I never bothered to learn their motivations and incentives, as that would not align for me. I am glad they are there to bid for my stuff.
The above is only for regular divs (not special divs).

The use of free-float in indexes is sensible as that is the float that is publicly available. So, excluded are restricted stock (held by executives, directors, connected entities, etc), closely-held stock (insiders, major holders), Treasury stock (buybacks that aren't cancelled). If total market-cap is used, then funds will try to buy many more shares than are publicly available, and that would create a problem.
Many recent IPOs offer extreme examples (ARM, Saudi ARMCO - in Middle Eastern markets, etc) where only a small % of market-cap is issued.
Most other funds use proportional adjustments when caps are encountered. For example, if 3 stocks are eligible to be counted in 50% limitation, and they have approximately the same free-floats, then 3X = 50, or X = 0.1667, or 16.67% weight for each may be used. But the XLK formula knocks down the smallest (even by the tiniest amount), so 2X + 4.5 = 50, or X = 0.2275, or the weights 22.75%, 22.75%, 4.5%. That is what will cause this massive shift as NVDA used to be #3, but now AAPL is #3.
https://corporatefinanceinstitute.com/resources/career-map/sell-side/capital-markets/free-float/
https://www.investopedia.com/terms/f/freefloatmethodology.asp

it's hard to argue that dividends don't matter.
Sigh. Once again, I am not saying that investors should fritter away dividends (dividends don't matter, so don't include them in your total return). Rather, I am saying that whether or not a security pays a dividend does not affect its total return.
I'll return to my PRW2X vs PRWCX example. They start out with the same portfolios. Then at the end of the first quarter, PRW2X distributes divs, while PRWCX retains them (until year end).
Assuming as we do when computing total return that all divs are reinvested, the distribution is on paper only. No money actually leaves the fund. The portfolio of PRW2X, which was identical to PRWCX's the day before the distribution is still identical to PRWCX's on the day of the distribution.
All that happens is that :
- the share price of PRW2X drops,
- investors get more shares (so that <outstanding shares> times <share price> is unchanged), and
- investors get a 1099 showing the payout.
Day by day, even through distributions, the portfolios of the two funds remain identical. So their performance must be identical.
Stocks are only slightly different. The math remains the same. The difference is that dividend payout ratio can be used as a signal of company health (and thus expected performance).
Stocks do not perform well because they pay out dividends, but rather the converse. Better performing companies tend to have div payout ratios within a certain Goldilocks range - not too low and not too high.
https://www.dividend.com/dividend-education/what-is-an-ideal-payout-ratio/

That chart shows QQQ +1984% with divs and if you add _QQQ (no divs) it shows +1721%.

Suppose you have 1 million in Fidelity SP500 (FXAIX) and you want $4K monthly. You can create a sell monthly trade on a specific date to run for years to do it...and you are done.

Only if you have the stomach for it. If you had $1M on Jan 1, 2022, and set up that trade you would be down $283,000 come October with zero guarantee that things were about to improve, and most likely torturing yourself thinking about what a terrible mistake you made.

My post wasn't discussing volatility, and no one advised to put it all in one fund.
It was an example of why you should invest based on TR and/or most people use risk-adjusted performance.
But why did you start on 1-1-2022? Why not start in 2008 and show it was down over 50%?
waggon:

How a fund delivers those dividends may have some short-term effect on returns, but there's no denying that dividends play a massive rose in returns. Since 1989, again according to S&P, the index has gained 1,393% without dividends; it's up 2,930% with dividends. With that kind of performance differential, it's hard to argue that dividends don't matter.

Why look at more than 30 years ago? The fact is that Divy have been going down. Since 2009, QQQ made about 1900% with minimal divy. High Divy stocks made a lot less than QQQ. (https://schrts.co/UhfIDyIu)

This is the likely outcome that is also reported by M* and others,
https://www.morningstar.com/news/marketwatch/20240617132/popular-tech-etf-forced-to-dump-apple-stock-buy-nvidia-in-upcoming-rebalancing
Things were really close in Friday's finish. In fact, AAPL was ahead of NVDA in the market-cap, but SPDR uses free-floats for XLK, and there NVDA seems ahead. So, for example, Warren Buffett couldn't have helped out his buddy Tim Cook by buying a few billion worth of AAPL that he sold recently - because of his large AAPL position, his shares are no longer part of the free-float.
All these articles do hedge a bit because SPDR/S&P hasn't issued a formal press release yet (why not?). But this huge AAPL to NVDA shift in XLK will be all done by the coming Friday, 6/21/24.
IMO, SPDR/S&P should review its strange way of rebalancing - nobody else does it in this silly manner.

Diversification means always having to say you're sorry about some investment in your portfolio!

I liked this one. Goes on the fridge.
Like a few others here, I am having trouble opening up my wallet to buy much at current asking prices - especially when I can expect to earn 5% in cash.

I guess Apple continues to be run conservatively.
https://www.cnbc.com/2024/06/17/apple-stops-offering-buy-now-pay-later-loans-in-us-.html

This is from a few minutes ago and i was surprised by the magnitude of change
https://www.cnbc.com/2024/06/17/nvidia-to-get-20percent-weighting-and-billions-in-investor-demand-while-apple-demoted-in-major-tech-fund.html

It was these assertions, the ones stating that large dividends help increase a fund's total return (i.e. enable it to catch up) that I've been questioning. You also wrote I was getting it backward. That it wasn't that higher dividends contribute higher total returns but rather that stocks with higher dividends tend to be better performing stocks.
Well, you'd be hard-put to invest in the S&P without investing in dividend payers. According to S&P, 403 stocks in the 500 pay dividends. All but two of the largest stocks in the index -- BRK and AMZ -- don't pay dividends. If you own a large-cap stock fund, you will get a dividend payout, most likely.
How a fund delivers those dividends may have some short-term effect on returns, but there's no denying that dividends play a massive rose in returns. Since 1989, again according to S&P, the index has gained 1,393% without dividends; it's up 2,930% with dividends. With that kind of performance differential, it's hard to argue that dividends don't matter.

I initiated a sizable stake in a CEF one morning around mid-week last week. I didn’t realize until after buying that it was set to go ex-dividend the next morning. At 2:00 PM the same day (a day before going ex-dividend) it fell out of bed, falling around 4%. The move was sudden, leading me to think somebody’s algorithm had kicked in. I then threw a few more dollars at it. It has been on the upswing for several days now, including even on its ex-dividend day and is now back near what I invested. With the dividend to be paid out in about 10 days, I’m ahead slightly.
I’m curious what, if anything, might have caused the brief plunge the day before going X? Best answer I can think of is folks felt it had been bid up in anticipation of going ex-dividend and wanted to cash out rather than hang around and wait to receive a dividend. Maybe there’s tax incentive for doing something like that? It’s crossed my mind that some big player noticed my 5-figure purchase in the morning and was trying to shake me out (prompt me to sell at a loss). I doubt that, however, because I don’t possess the kind of mega-bucks necessary to be considered a serious player or elicit another trader’s attention. Just food for thought … Obviously, I’m relieved to see it recover all its one-day losses over 3 or 4 trading days.
PS: Yogi once said: “Dumb money in the morning. Smart money in the afternoon.” Certainly held true in this one case.

This seems to be the October 1 - Sep 30, 2025 outcome period version of CPSM which started on May 1. Not sure why they picked Oct 1. May be they received interest with enough size for that date to make it worthwhile for them.

@stillers. Perhaps another universe is oddly phrased, but my financial life would be entirely different if I had a pension check roll in every month. Many decisions would be looked at differently.

Oh, now I get it!
And agreed, our collective SS and Pension incomes result in negligible, if any in some years, annual income gap. Makes a world of difference in all of our financial and investment decisions. We played it close to the vest in our first five years of retirement, but have swung for the fences in our last seven. To our credit though, we started planning for our retirements and this very situation on Day 1 of our first professional jobs in 1980. Well, I did at least. The missus got on board a wee bit later!

Nice chart in this article:
https://www.cnn.com/2023/09/07/success/pensions-retirement-savings-explained/index.html
https://www.investopedia.com/articles/retirement/06/demiseofdbplan.asp#:~:text=Key Takeaways,to manage than pension plans.
https://www.the-ifw.com/retirement/why-did-pensions-go-away/#:~:text=In the 1980s, the United,voluntary contributions towards retirement plans.

@stillers,
While I am not directly invested in the AI theme, I would appreciate you telling us when you think it may be time to get off the semi-conductor or Nvidia trade train (or when you sell). I know from your posts that you are directly invested in the AI theme and so your judgement is as good as any for me.
(I previously posted: If I do not respond to future posts about Rev Rec, pl do not assume I agree with any commentary in those posts. I have no comment on the Seeking Alpha article.)

Yeah, the proverbial $64K question.
Macro: The history of AI goes back to the 1950's. I posted a link this year detailing the phases. The current AI phase is expected by some of the analysts I follow to have another five years of growth in it. So there's that.
Micro: As I've posted a few previous times...My greatest exposure to AI is via FSELX though I certainly get plenty more via other OEFs. I've owned FSELX since near its inception. I routinely shave its allocation when it exceeds a given % of our Market Portfolio, and usually roll the proceeds to broader tech funds. That time has come again and I will likely be lightening up this week on FSELX to that extent, put may park the proceeds this time in FZDXX (per the following notion). I am also considering lightening up this week on some other OEFs with heavy tech/AI allocations. The FSELX sale is pre-programmed, so to speak, while the latter sales, if they happen, will be more of a gut feeling that I may be getting a wee bit greedy here. I will post any sales in this regard on the B/S/W thread. But no plans to significantly alter my tech/AI allocation...yet.