Author Archive: Michael Foster

Where are we to put our money in this levitating market—and how do we dodge the (many) overpriced stocks (and funds) ready for a fall?

Today I’m going to answer both questions, with one group of investments that are way overvalued—even though they look like bargains. Buy these “value traps” and you’re primed for a fast double-digit plunge (or worse).

Then we’ll move on to a group of 10 closed-end funds (CEFs) that are the opposite—most folks wrongly think these conservative, steady-Eddie buys are tapped out, but they’ve still got plenty of gains (and dividends up to 10%!) ahead.

Earnings and Share Prices Part Ways

I say “levitating market” because we’re seeing stocks soar—up 24% year to date—while that gain doesn’t, at first blush, seem supported by earnings: third-quarter profits are down 2.4% year over year, and have been down for three quarters in a row.… Read more

I’m going to show you my favorite (perfectly legal) way to pay 0% tax on your dividend income.

To show you the big savings this could mean, let’s look at two fictional investors who are nearing retirement: Jane and Janet.

We’ll assume both are single, are earning $50,000 per year and live in a state with no income taxes. Now let’s assume Janet has taken the so-called “right” path, as suggested by her financial advisor, while Jane has steered her own course. A quick look at both will show how that “right” path can create a hefty tax problem.

Let’s say Janet put a million dollars in the Vanguard S&P 500 ETF (VOO) because she’s been told that a low-cost index fund is best for retirement.… Read more

There’s a quiet shift happening in the market—and today I’m going to show you how to tap it for further gains. (And I’ll reveal a closed-end fund paying a safe 6.9% dividend, too).

What’s more, this simple move will help insulate your nest egg from a flare-up in the trade war (still very much on the table despite chatter about a “Phase One” deal with China) and other overseas dangers that could take investors by surprise—especially those who simply buy an S&P 500 index fund and hope for gains.

It starts with a pattern that’s emerged in the latest earnings numbers.… Read more

It’s been a terrific year for one specific group of funds—and that means, if you’re one of many people who own them, you need to be very careful.

I’m talking about senior-loan (also known as floating-rate) funds, which have made big gains in 2019. That’s lulled many folks into a false sense of security, idly thinking these steady returns will roll in for the long term.

That’s a big mistake.

To see what I mean, look at the Invesco Senior Loan ETF (BKLN), which serves as something of an index for senior loans. It yields 5.2% and is up 7.3% in 2019.… Read more

It’s a line you’ve no doubt heard before. It goes like this: “The market is too efficient to beat, so you may as well just park your cash in a low-cost index fund and call it a day.”

Nonsense! The truly ridiculous thing is, this myth is proven wrong every day—but investors just can’t quit it. And it’s costing them triple-digit returns (and 7%+ dividends) that could leave them well short of what they need to retire.

For proof that this market is far from efficient, just look at the one-day 22% drop in shares of Beyond Meat (BYND). That came after the company beat revenue expectations and its profits were twice what the market expected.… Read more

I run across “buy and hope” investors all the time. You know the type: they latch on to a big-name stock, like Visa (V) or Berkshire Hathaway (BRK) and “hope” for big price gains.

Truth is, that’s their only option. With most big-cap stocks paying less than 2%, they’re sure not getting much in dividends!

Sad thing is, most people think this is the only way to invest. But there’s a better, safer approach. That’s what I’ll show you today.

It’s a simple investment that lets you buy the big-cap stocks you know well, but with two key differences: you’ll get a 9.2% dividend, so you’re getting much of your return in steady cash payouts …

… and you’ll be able to buy them for less than folks who pick them up individually, or through an index fund.… Read more

It’s a statement we hear from readers a lot: “I’m worried about another 2008.”

I get it. After all, we’re all 11 years older and have that much less time to recover from a crash. So today we’re going to cut through the noise and look at whether there really is something to worry about here.

We’ll do it by comparing, point for point, what’s happening now to the run-up to the 2008 crash. I think you’ll be surprised by the results.

Let’s dive in.

This Happened in 2006—and Again Last March

We started hearing about the inverted yield curve—when yields on short-term Treasuries move higher than those on longer-term ones—seven months ago.… Read more

When I show people how closed-end funds (CEFs) can hand them safe 7% yields and let them retire on much less than a million bucks, they often say one thing:

“Why the heck hasn’t my financial advisor told me any of this?” 

The reasons are both simple and surprising: 1) Many financial advisors don’t fully understand how CEFs work, and 2) Some CEFs involve a bit of research, so for a lot of advisors it’s easier to recommend low-cost index funds and call it a day.

Both of these (unacceptable) reasons are costing folks millions in profits!

So today we’re going to demystify CEFs by zeroing in on a fund that’s crushed the market for nearly two decades.… Read more

If you own closed-end funds (CEFs), I have great news: equity CEFs are doing exactly what we want them to: crushing the market while handing us 7%+ dividends.

(And if you’re not yet in CEFs, or want to bulk up your CEF holdings, sit tight: I’ll name a fund you can buy shortly. It has an extra kick in store, thanks to an over-torqued corporate failure: I’m looking at you, WeWork.)

First, here’s what stocks have done this year:

Stocks Soar …

And here’s what CEFs are up to (with the beige line at the top being the equity CEFs tracked by my CEF Insider service).… Read more

If you’re stuck with measly dividends from stocks or Treasuries, closed-end funds (CEFs) are the answer.

After all, these funds yield an amazing 7%, on average, and they let you buy in at a discount (most CEFs trade for less than their net asset value, or NAV).

The One CEF Question I Get a Lot (and the Surprising Answer)

A reader or subscriber to my CEF Insider service will sometimes ask me: can I lose money with CEFs?

The technical answer is, yes, of course—as with any investment, you can lose money. Even when you put your money in the bank, there’s a risk of losing it if the bank goes under and the FDIC collapses.… Read more