Author Archive: Michael Foster

It’s one of the biggest worries I hear from investors who hold bonds: what’s going to happen to my portfolio when the Federal Reserve raises interest rates?

My short answer is always the same: don’t worry—it’s not as big of a deal as you think.

That’s true for many bond funds out there—but there are some that are still ticking time bombs because they’re poorly managed. The worst offenders are the ones that aren’t managed at all—the “dumb” funds that blindly track the index and keep a ton of bonds from near-bankrupt companies alongside much better issues.

Funds like the iShares iBoxx High Yield Corporate Bond ETF (JNK) and the SPDR Bloomberg Barclays High Yield Bond ETF (HYG) are the worst offenders here.… Read more

I’ve been getting a lot of emails from readers worried about how closed-end funds (CEFs)—especially bond-oriented closed-end funds—will perform next year, when the Federal Reserve raises interest rates.

And that’s definitely a when and not an if—there is too much good economic data to suggest the Fed will back off its rate-hike plans, which both it and most US legislators desperately want to happen.

(A couple weeks ago, I gave you my outlook for the US economy in 2018 and named 5 non-bond CEFs to buy before the New Year arrives. Click here to read that article.)… Read more

The tax reform debate in Washington is roiling the municipal bond market—and that’s setting up a screaming buying opportunity for contrarians on the hunt for income.

I’ll tell you why, and show you exactly how to cash in, in a moment.

First, if you’ve been watching “munis” for any length of time, I probably don’t have to tell you that muni-bond investors detest uncertainty.

That’s because they’re risk-averse folks who just want a high, tax-free yield on their money.

After all, that’s what municipal bonds are for; they offer higher yields than US Treasuries; they’re untaxed for most Americans, unlike federal bonds and stock dividends; and their prices don’t fluctuate much.… Read more

I’ve spoken to a lot of investors who are still scared of real estate after the housing bubble burst in 2008. These folks have a lot of cash on the sidelines, and they’re desperate for income, but they’re too scared to jump into real estate.

Usually when investors express these fears, I show them this chart:

Real Estate Beat Stocks in the Real Estate Crash

This is a chart of the SPDR S&P 500 ETF (SPY) and the SPDR Dow Jones REIT ETF (RWR). The latter only holds real estate investment trusts (REITs), which are companies that rent out real estate and pass most of the rental income to shareholders as dividends.… Read more

I usually write about the beauty of closed-end funds (CEFs) and how we can tap them for yields of 7% or more while also beating the S&P 500 index.

Today I want to talk about the dogs of the CEF world.

And there are plenty of dogs to talk about—they’ll kill your returns while promising big income streams that aren’t what they seem.

It’s a shame, because a lot of these rotten CEFs attract first-level investors who don’t look beyond the dividend yield. As a result, these folks often get buyer’s remorse when they discover those big dividends were actually hiding a grim—and riskier—reality.… Read more

If you’re a contrarian investor, you know that the market loves to overreact—and that mass hysteria can hand you some nice profits.

That’s because panicked first-level investors toss great investments over the side along with the bad. We’re happy to step in when they do, buy at a discount, then sit back and watch the price snap back.

This is exactly what Warren Buffett refers to when he says to “buy when there’s blood in the streets.”

And it’s even better if there are high dividend payouts on offer.

Funny thing is, these deals are often hiding in plain sight. In fact, one of the most popular stocks in the world was ridiculously underpriced just under two years ago: Apple (AAPL).… Read more

Right now, there are plenty of safe 9%+ dividend yields sitting right under investors’ noses—literally hiding in plain sight!

Where? In the utility sector.

That’s right. As I write this, you can easily grab payouts 5 times the market average from some of the stodgiest companies out there—so conservative they used to be called “widow-and-orphan” stocks due to their ultra-safe payouts and low risks.

The key to the “hidden” 9% income streams available in utilities today is a special kind of high-yield fund called a closed-end fund (CEF). I’ll explain more and show you 9 buy candidates—including my top utility CEF pick—in a moment.… Read more

The Federal Reserve’s rate hikes getting you down? You’re not alone.

A lot of readers have written in, worried that the Fed’s plans to increase interest rates in 2018 are going to hurt their portfolios. Investors starved for income have been piling into high-yielding assets that could get hit by a selloff if interest rates rise.

Those assets would go down because when the Fed increases interest rates, it causes rates all around to go up. So if you hold a bond that pays an interest rate from before that rate hike, its resale value will decline because there are now new bonds that pay higher interest rates, which makes the older, lower-yielding bond less desirable.… Read more

There are plenty of great reasons to invest in a closed-end fund, including my No. 1 reason: dividends! With CEFs routinely throwing out yields of 6% and up—often paid monthly—they’re tough to beat in a world where Treasury yields are stuck around 2.4%.

If you’re new to these funds, your timing couldn’t be better. I recently wrote a primer on CEFs that gives you all you need to know.

And today I’m going to show you 16 CEFs with juicy yields all the way up to 11%.

But before we get to that, we’re going to zero in on the one thing that makes the difference between a winning fund with a stable—and growing—dividend and a dangerous dividend trap: management.… Read more

Today we’re going to take on one of the biggest investing myths there is—and expose this so-called “gospel” for the dangerous falsehood it really is.

It goes like this: diversification protects you from big losses in a downturn, but that “shield” costs you in the form of income and missed gains.

Well, I’m here to tell you that this statement couldn’t be more wrong. The truth is, you can have both.

I’ll tell you how in a moment. Then I’ll show you 6 unsung funds that hand you instant diversification plus market-beating gains and a special extra bonus: a dividend yield that triples up the payout on the average S&P 500 stock.… Read more