February 4, 2018. The dividends have been coming in hot and heavy Thursday and Friday….in addition to very nice price increases in the Core Portfolio positions. In other words, the Total Return–dividends plus capital appreciation is good.
We had been expecting some sort of pullback, but with the good jobs report and supposedly positive talks with China, maybe the markets will continue higher.
Barrons arrives every Saturday morning. We usually only skim thru this financial newspaper because it is targeted to the hard core stock traders. But we did see several articles this week which were very good, including one about ‘term’ funds. Here is some of the article, and it is linked below.
For this reason, financial advisors frequently recommend that retirees build a laddered portfolio of bonds. Each bond (or, more typically, group of bonds) has a different maturity date—2020, 2021, 2022—to meet a different income goal. As the nearer-term bonds mature, you can spend that cash or reinvest it in longer-dated, higher-yielding securities to form another rung on the ladder. This strategy, however, requires a hefty investment.
(note: we own three Bulletshares funds and numerous ‘term’ funds) There are exchange-traded funds—such as Invesco BulletShares 2025 Corporate Bond (ticker: BSCP)—that offer diversified bond portfolios that mature, or liquidate, on specific dates, just like individual bonds. But interest rates are still low, and most such ETFs yield only 3% to 4% annually. One way to increase that payout is to buy an ETF focused on high-yield bonds, such as Invesco BulletShares 2025 High Yield Corporate Bond (BSJP), which yields 6.9%, but ramps up credit risk.
A much-overlooked investment addresses all of these challenges: a closed-end fund with term limits. Closed-ends often frustrate inexperienced investors because they can trade at discounts to their underlying portfolio’s net asset value (NAV)—and the discounts can persist indefinitely. So, you might never get the full value of your investment. But “term trust” closed-ends solve the problem because they liquidate their holdings at market prices on specific maturity dates. The discounts disappear and investors get the full portfolio return. (Conversely, if such a fund were bought when it was fetching a premium to NAV, the buyer would be hurt at liquidation.)
I like this strategy enough that I invest in such closed-ends myself. Say, instead of buying Invesco BulletShares 2025 High Yield (BSJP), you bought Western Asset High Yield Defined Opportunity (HYI), which I own. It also is maturing in 2025—on Sept. 30. But as of Jan. 25, it was trading at a 13.2% discount—with a share price of $13.68 and an underlying NAV of $15.76. If the fund were maturing now, that $13.68 share price would rise to $15.76 as the fund liquidates—a gain of 15% above whatever income the fund is already paying from its underlying bond portfolio. Since the fund matures in 6.7 years, the discount closing will amount to two percentage points of additional return a year above the underlying portfolio’s return.
NOTE TO NEW READERS: Before you buy anything we discuss here, GO to the Core Portfolio tab to see a CURRENT listing of holdings. This blog is designed for investors seeking income.
The Congressional Research Service (CRS) says President Trump has the legal authority to build significant portions of a border wall without additional congressional authorization or declaring a national emergency.
A poll of 2,700 Trump voters shows that President Donald Trump will lose 43 percent of his base of support if a border wall is not built.
What’s more, the poll shows that only 43 percent of Trump voters consider the conclusion of the government shutdown a victory for Trump, even as 60 percent approved of ending the partial shutdown.
150,000 Miles: Elon Musk’s 2018 Private Jet Log Defines The Renewable Energy Savior’s Hypocrisy
It was just days ago that we brought you the latest story of liberal hypocrisy in which a billionaire, who was urging the world to eat less meat for global warming purposes, also happened to be jet-setting around the globe in her private jet, leaving a sizable carbon footprint behind.
The “save the Earth hypocrisy” torch continues its journey today, passing from her hand directly to the left’s favorite poster child for all causes environmental, Elon Musk. The Washington Post reported today that Musk’s corporate jet flew more than 150,000 miles in 2018, equal to six times around the Earth and dwarfing numbers put up by other (consistently profitable) CEOs like Tim Cook and Jeff Bezos.