Key Points
Retirees are the biggest income focused individual investor demographic, with Baby Boomer aged retirees cumulatively totalling over 73 million.
CEFs and ETFs focused on cutting edge sectors of technology, medicine, and others are often structured to appeal to younger investors more familiar with those sectors’ latest breakthroughs.
Provided that an investment product can satisfy concerns about risk and provides the income a retiree is seeking, there’s no reason for them not to add it to their portfolio.
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The Baby Boomer generation has an unusual relationship with technology. Due to the huge strides made with digital technology, computers, smart phones, A.I., and all other associated telecommunications and information processing they entail, there is a somewhat unfair stereotype that a majority of seniors are Luddites and still living exclusively in the analog realm.
Besides the fact that most of the people who built the current architecture, i.e., Bill Gates, Steve Jobs, Larry Ellison, et al. are all Boomers themselves, a silent but sizable percentage of seniors are actually quite comfortable with digital technology. For example, according such sources asTech TimesandHerosmyth:
- 68% of Boomers owned smart phones, with nearly the same number also owning laptop or desktop computers.
- 90% of Boomers have shopped online, with 79% of them in their 60s and 72% of them in their 70s.
- 68% of Boomers use social media,
- 30% of Boomers are comfortable using A.I.
Comfort Levels are All Subjective
Risk tolerance and intellectual comfort levels with different investment vehicles are totally subjective criteria and defy easy categorization by age, race, or occupation.
As much as marketers love to use statistics and demographics to categorize different targeted groups with select marketing criteria, these are only gross generalizations. The attraction of big data marketing has been to get granular with each user’s individual preferences, lies, and dislikes – and investment products are no exception.
Conventional wisdom usually holds that younger people are much more prone to invest in riskier products – perhaps due to the folly of youth – yet, when April’s market plunge in the wake of President Trump’s reciprocal tariff policies gave Gen-Z a taste of the bear market, a surprising percentage of them have become more conservative investors. As a result, although it may hold for a plurality, it’s not fair to assume that a tech fund would not appeal to a majority of retirees due to their complexity and unfamiliar company portfolio, vs. a more conventional index fund. TheBlackRock Science and Technology Term Trust (NYSE: BSTZ)and theNuveen NASDAQ 100 Dynamic Overwrite Fund (QQQX)are two such examples.
As a Closed End Fund (CEF) from multi trillion asset management behemoth BlackRock, BSTZ is a one of a kind fund:
- Unlike most closed end funds that invest in other public companies, BSTZ carries a roughly 60/40 ratio mix of private companies to public ones.
- All the stocks are in the technology sector, and some of the portfolio’s largest positions are in privately held companies, such as AI firm Databricks, China’s Bytedance (owner of TikTok), and fintech Klarna, which is expecting its IPO in 2026.
- In addition, BSTZ deploys a covered call strategy that delivers over $12 per year in dividends.
- Perhaps due to its experimental structure and design, BSZT has an expiration date scheduled in 2031, albeit subject to extension with an option towards perpetuity.
QQQX was one of the first covered call CEFs. Designed to track the Nasdaq 100 Index, QQQX has an 18-year track record of consistent growth and dividend yields. Its conservative call option strategy helps to mitigate inherent volatility in the technology overweighted Nasdaq 100 Index without over reduction of upside gains from the index’s bullish trajectory.
A side-by-side comparison of the two appears as thus, based on market price at the time of this writing:
Category | BSTZ | QQQX |
Yield | 11.61% | 8.18% |
Average Option Coverage | 30-40% | 56% |
Mkt. Price/NAV | $22.19/$24.19 | $27.37/$29.77 |
Premium NAV discount | -8.27% | -8.18% |
Average Daily Volume | 245,630 shares | 115,371 shares |
Number of Securities | 82 | 206 |
Net Assets | $1.663 billion | $1.423 billion |
Expense Ratio | 1.48% | 0.89% |
1-Year Return | 29.45% | 19.66% |
3-Year Return | 14.85% | 18.44% |
5-Year Return | 6.15% | 11.03% |
A CEF For Retirees Depends On The Profile Of the Retiree In Question
An individual retiree’s investment criteria and comfort levels are a much greater determinant of his or her investment choices than demographic categories.
When viewed objectively, income seeking retirees may find either or both CEFs attractive for their portfolios. The primary criteria in individual comfort level and risk tolerance, a totally subjective criteria that can’t be easily quantified by age, race, background, or other categories.
With that in mind, here are some potential choice scenarios:
- Investors solely looking for the higher yield, regardless of risk, will prefer BSTZ, which still offers a roughly 3 points higher yield after factoring in expense ratio differentials.
- If the investor in question wants consistent growth along with solid yields, QQQX will be preferable, since BSTZ’s returns have a 23 point differential between 1 and 5 years, vs. an 8 point differential for QQQX in the same period.
- Investors who like the idea of pre-IPO exposure to companies with high growth potential will prefer BSTZ, which offers private equity fund type exposure with public stock market liquidity and a chunky dividend.
- Some investors may wish to take a small amount of both BSTZ and QQQX for diversification purposes, given that they are so different from one another.
