Call-Writing Funds a Shelter in a Storm

This column was originally published on RealMoney on Sept. 26 at 8:14 a.m. EST. It's being republished as a bonus for TheStreet.com readers.

The right type of diversified portfolio can be thought of as a comfortable mix of hot potatoes and steady Eddies. I'm expecting 2006 will be a rough year for domestic equities, so I think it will make sense to have a heavier weighting than normal in steady Eddies.

This is a role that call-writing closed-end funds, or CEFs, can play.

One of the most popular categories of new products this year, call-writing CEFs buy stock and sell either covered calls or index options (calls and puts) to generate income. ...