Author Archive: Michael Foster

If you’ve been investing long enough, you’ve no doubt run across the 60/40 portfolio. Maybe you’ve used this approach yourself. Or maybe your financial advisor told you about it (it’s an advisor favorite!).

As the name suggests, the 60/40 portfolio is simply a portfolio that seeks to automatically balance risk by holding 60% in stocks and 40% in bonds.

It sounds sensible enough, but history shows that people who invest by this rule have been leaving a lot of money on the table for a long time:

60/40 Portfolio Pays Too High a Price for Low Volatility

One quick glance at US stocks, seen here in purple through the Vanguard Total Stock Market ETF (VTI), and bonds, in orange through the Vanguard Total Bond Market ETF (BND), shows a problem.… Read more

Let’s go ahead and use the quickest, most reliable strategy I know of to kickstart a reliable 7% income stream that rolls our way every month.

My specialty is writing about stocks, bonds and closed-end funds (CEFs), but all of these are really a means to the end of achieving financial independence. What really matters is how much income you can pull out of these investments to fund your lifestyle.

The answer is a lot more than you might imagine. I’m going to show you how to pull 7% out of three funds that pay monthly and offer diversified income streams based on bonds issued by large, well-established companies (think of this portfolio as being like a big commercial bank, but one diversified across the world).… Read more

The stock market’s 2023 recovery begs the question: are we in for a reversal next year? And if so, what does that mean for our closed-end funds (CEFs)?

It’s a natural concern, but it’s important to remember that bull markets don’t die of old age. Plus, we aren’t in a bull market—the S&P 500 still hasn’t fully recovered from its drop over the last two years, let alone priced in the economic growth over that time.

Whether stocks will or won’t price in that growth in 2024 depends on three things we’re likely to hear a lot about next year. The first will be something that’s seemingly been everywhere for the last two years.… Read more

Today we’re going to use a simple strategy to (legally!) beat the tax man. The key is a (too) often-ignored group of funds whose dividends are beyond the reach of the IRS.

The low-risk assets behind this income stream really should be part of any income investor’s portfolio. And the three tickers we’ll discuss below, which yield up to 7.9%, are a great place to start. Thanks to their tax-free status, their “real” yields will likely be considerably more for us.

Enter “Boring But Beautiful” Municipal Bond Funds

Here’s the truth on taxes: If you’re an American and you receive any kind of income, you’re going to get taxed.… Read more

It’s mid-December, and everyone wants to know if stocks—and by extension high-yield closed-end funds (CEFs)—are poised to roar into ’24 in a so-called “Santa Claus rally.”

I’ll venture a prediction, but before I do, I should tell you that I come at the whole idea of a Santa Claus rally from a bit of a different angle than most folks in the business media or on Wall Street.

I actually dislike Christmas cheer in the markets. Not because I’m a Grinch. Rather, it’s because I think Santa rallies are not a good sign for stocks going forward.

Take 2021, a year in which market sentiment whipsawed.… Read more

Today we’re going to build ourselves an outsized income stream with just three funds. Buy all of them and you’ll end up with an average yield of 8%+, with payouts rolling your way every month.

Investing doesn’t get much simpler than that!

You’ll also get strong diversification: The three funds we’re about to uncover hold stocks, bonds and real estate. Combined, give you exposure to thousands of assets across the country.

Maximizing Your Savings Potential

Before we go further, let’s put an 8% payout in perspective: If you have $1 million saved, it translates to $80,000 annually, or over $6,600 per month—a substantial amount that could either supplement or even replace your current income.… Read more

It’s that time of the year again. I’m not talking about shopping for the kids, I’m talking about 2024 predictions—especially for our favorite dividend plays: big-yielding closed-end funds (CEFs).

It’s a particularly good time to talk about CEFs because the 2022 selloff has left us some pretty sweet deals that are still around … even though 2022 ended more than 11 months ago! Chief among these “held-over” bargains is the 11.7%-paying CEF we’ll get to in a sec.

First, when it comes to predictions, we should be clear that these days, the market mood tends to shift around the time the calendar flips.… Read more

When I see people touting the 60/40 portfolio, I kind of feel like Haley Joel Osment’s character in the Sixth Sense. But instead of seeing dead people, I see dead ideas.

You likely know what I’m talking about: a portfolio that seeks to automatically balance risk by holding 60% in stocks and 40% in bonds.

It sounds sensible enough, but history shows that people who invest by this rule have been leaving a lot of money on the table for a long time:

60/40 Portfolio Pays Too High a Price for Low Volatility

One quick glance at US stocks, seen here in purple through the Vanguard Total Stock Market ETF (VTI), and bonds, in orange through the Vanguard Total Bond Market ETF (BND), shows a problem.… Read more

With the S&P 500 up double-digits this year, the media is at it again—cranking up worries that we’re headed for another crash.

“Stock-Market Crash: Expert Shares Huge ‘Red Flag’ Signaling Recession,” says Business Insider. “Will the Stock Market Crash? This Hedge-Funder Thinks So,” declares New York Magazine.

And on it goes.

I suppose it makes sense, given that the S&P 500’s roughly 19% gain so far this year is a lot more than its typical return. Thing is, 2023 does not exist in a vacuum divorced from history, and just a tiny bit of history shows we’re not yet in a bull market, and stocks are not overheated, despite their recent gains.… Read more

Here’s something you might be surprised to hear: according to the numbers, the US economy is actually doing well—and yet (almost) nobody wants to admit it!

It’s a misconception we income investors can exploit with the three high-yielding picks we’ll cover below.

It’s a weird turn of events, but it makes sense. Since the pandemic, itself an event of shocking turmoil, it seems that the chaos around the world is getting worse, and our fundamental hope for humanity makes us think that this just can’t be good for growth.

Except that’s not how things typically play out.

Global Turmoil = Faster Growth?… Read more