High-Yield Investing editor Carla Pasternak recently found one such investment. This unique fund was able to show positive returns in 2008 -- in the process, beating the S&P 500 by more than 40 percentage points. In addition, new investors to this fund are being showered with a 10.4% yield.

Eaton Vance Risk-Managed Diversified Equity Income Fund (NYSE: ETJ, $17.29) -- This closed-end fund is run by Eaton Vance, a firm with more than $100 billion under management.

Since inception in July 2007, the fund has paid a dividend of $0.45 each quarter, or $1.80 a year. At current prices, that works out to a yield of 10.4% ($1.80/$17.29).

With a fund objective to minimize losses during bear markets, ETJ is well suited for today's markets. To achieve this objective, ETJ invests in a portfolio of blue-chip dividend-paying stocks such as Chevron (NYSE: CVX), Wal-Mart (NYSE: WMT) and Pepsi (NYSE: PEP). It then uses a complex strategy of buying and selling put and call options on stock indices like the S&P 500 and on individual stocks in its portfolioSo far the strategy has worked extremely well. ETJ is classified as a large-cap growth fund. The fund was ranked number 1 in its category for 2008. While large-cap growth funds delivered total returns (including share price and distributions) of some -38%, ETJ returned +6%. ETJ also dramatically outperformed the S&P 500 Index, which returned about -37% on the year.

The fund is managed by Walter Row and Michael Allison. These CFAs (Chartered Financial Analysts) have more than 45 years of combined experience.

As of September 30, 2008, the date of the last report, the fund's $1.03 billion portfolio consisted of 106 stocks. Its assets were spread across diverse sectors from financial services (14%) and information technology (13%) to consumer services (12%), healthcare (12%), and energy (11%).

Nearly 7% of its investments were in S&P 500 put options of various durations; these puts (which increase in value when the market falls) are a key part of its strategy. They both generate income and protect the fund's share price from declining in a bear market. While today's volatility has weighed on many high-yield securities, ETJ actually benefits from the volatility, which increases the price of the options it writes. When volatility rises, option premiums increase since the volatility makes it more likely buyers will be able to exercise their options at a profit.

ETJ has so far demonstrated a strong ability to navigate extremely difficult market waters. Despite the bear market, its share price has held up well. The yield of 10.4% is extremely robust compared to the 10-Year Treasury's yield of just over 2%, making the fund especially attractive today.
 

Good investing!

Carla Pasternak
Editor
High-Yield Investing

About High-Yield Investing

High-Yield Investing is a monthly investment newsletter that brings you a wealth of information on the market's leading income stocks and funds, as well as a host of relatively unknown investment options that you probably won't find coverage of anywhere else. Many of these securities provide investors with annual dividend yields of 10%, 15%, even 20% or more. The newsletter not only provides subscribers with investing ideas that produce incredibly high dividend yields, but the kicker is that these high-yield investments have also consistently outperformed the major market averages. (Learn More)

About Carla Pasternak

Editor of StreetAuthority.com's High-Yield Investing newsletter since its inception in May 2004, Carla Pasternak draws on a variety of financial backgrounds to make profitable calls on income-generating stocks for her readers.

Carla has been employed in the investment industry for more than two decades. In addition to her work as a writer for several nationally recognized financial publishers, her previous experience includes a position as president of a well-respected investor relations firm. She has also been writing shareholder reports for public companies since 1980.

A highly successful investment analyst, Carla specializes in high-yield, income-paying stocks. In that pursuit, she's always mindful to select companies that not only pay rich dividends, but that also deliver strong long-term capital gains. Furthermore, Carla's experience in writing SEC filings gives her the added insight required for her to truly understand a company's current and future financial health.

On the educational front, Carla holds BA, MA, MBA and Ph.D. degrees. When she's not watching the market, she's teaching business courses at the college level and managing millions of dollars in portfolio assets.

To learn more about Carla Pasternak's premium income investing newsletter -- High-Yield Investing -- please visit this link.