Sent: Wednesday, August 11, 2010 6:03 PM Subject: Risk/Reward Vol. 14 THIS IS NOT INVESTMENT OR TAX ADVICE. IT IS NOT ADVICE AT ALL . THIS IS A PERSONAL REFLECTION ON INVESTING. RELY ON NOTHING STATED HEREIN. Consolidation days such as today are excellent portfolio tests and present good buying opportunities. As of today's close, 75% of my trades are still in positive territory with only 3 of 71 exceeding 5% in loss. None of the positions has exceeded the 8% stop loss line, and I have sold nothing since beginning this venture on May 10, 2010 when the Dow was much higher. That stated, I am tiring of the performance of AINV and INTC. The former may be worth holding because of its outsized dividend, but the latter is simply a see saw and clearly not an appropriate vehicle for exposure to the traditionally non dividend paying tech sector. Accordingly, in celebration of my purchase of a MacBookPro, I bought AAPL on a dip today. I also bought GLD on a dip in anticipation of the annual "September rise in gold". Thanks to one of our readers who reminded me to inform all that I am not a tax advisor. Each of you should determine independently your own tax issues such as the suitability of any investment in a retirement account. Thanks also to one of our readers who directed me to closed end funds and to closed end municipal bond funds in particular. I have been studying them for several evenings. As you may recall from Vol 1, I have been hesitant to invest in municipal bonds because the current yields on short and mid term bonds do not warrant the ever increasing risk, in my opinion. Moreover, I do not like traditional bond mutual funds which rely on bond trading as much as yield for a return. Close end funds operate differently. A close end fund raises money from an IPO and uses the proceeds to purchase positions in a specific asset class, here municipal bonds. The shares trade on the secondary market thereafter, just like stock and some of the funds show decent volume. Fund sponsors then employ espoused strategies in actively managing the holdings. Importantly, unlike mutual funds and ETF's, CEF's are allowed to use leverage through borrowing, a practice which can be beneficial in times of low interest rates such as today. Thus even a portfolio filled with 4% bonds can return 6+% due to this leveraging. I suggest you read more about this at www.cefconnect.com . By investing in a municipal bond CEF, one can achieve a good and immediate tax advantaged return (6% tax free = 10% tax equivalent), paid monthly, in a liquid market, while hedging against low interest rates. This morning , I dipped my toe by limit ordering NMO. It actually went up 80bp today.