With stocks back in “climb” mode (at least for now!), it could seem like a good time to look for a hedge against the next downturn.

If you’re looking for hedges that also pay big dividends, you might be considering resource funds—especially those in oil and gas, or maybe even gold.

Today I’m going to show you why you should resist this strategy, or at least be very careful about it. Closed-end funds (CEFs), which yield 8.3% on average today, are my beat at my CEF Insider service, so I’ll use CEFs (which we love, especially outside the resource space!)… Read more

One year ago, I wrote to you that it was time to buy bonds again. The “index huggers” who only know SPY thought we were nuts for talking fixed income.

The popular narrative at the time (which aged like boxed wine) was that interest rates would rocket to the moon in order to contain inflation. Or help the government fund its ballooning deficit. Or some line of reasoning.

When rates rise, bond prices fall. Hence, the prevailing vanilla sentiment was that bonds were for bums.

We original thinkers disagreed. We reasoned—correctly—that rates fall when recession fears grow. Period.… Read more

I recently had dinner with a friend who’s a small business owner, and he swears by ChatGPT. The tool is saving him time, effort and (to be blunt) future employee hiring.

A lot of people think AI is imploding—hence the selloff in tech stocks we saw following last week’s softer-than-expected jobs report.

But the truth is, AI is simply moving past the initial excitement we see with every new technology. As AI embeds itself in the apps and devices we use every day, it’ll boost productivity, just like it’s doing for my friend.

As that happens, we’ll want to make sure you have some AI exposure in our portfolios, especially as ChatGPT replaces more expensive humans, a trend that’s already in motion, as we can see from last week’s jobs report.… Read more

When it comes to investing, there are two critical “bedrocks” we need to keep in mind. Everything else builds out from there.

They are:

1. Diversification cuts your risk of loss. The more diversification, the lower your risk.
2. In the long term, stocks and bonds make money, regardless of short-term volatility.

These two facts are why 95% of my favorite high-income investments, closed-end funds (CEFs), have made investors money over the last decade. Those include the 8.4%-yielding Adams Diversified Equity Fund (ADX).

ADX’s portfolio of large cap stocks includes Microsoft (MSFT), Visa (V), JPMorgan Chase & Co. (JPM) and Eli Lilly & Co.… Read more

The index huggers are, rightfully, fretting about the only position they own, the S&P 500, which is heavy on Nvidia (NVDA). The soon-to-be-fallen angel is the third largest component of the index at 6.3%.

“America’s ticker” SPDR S&P 500 ETF (SPY) yields only 1.2% and trades for 22-times earnings. The S&P SmallCap 600, meanwhile, which nobody owns, trades for a more reasonable P/E of 16.

And select small caps even pay serious dividends. I’m talking about yields between 9.1% and 14.7%.

But are these value stocks? Or are they merely cheap for a reason? Let’s explore a group of five small caps paying big dividends.… Read more

The spike in volatility we’ve seen in the last month has gotten me thinking a lot about the last decade—when bonds were a bust and tech ruled the day.

Put yourself back in that (seemingly innocent) time for a second.

If you had money to invest back then, you had one choice: stocks. With rock-bottom interest rates, bonds were a bust. And stocks—particularly tech stocks, which tend to do better when rates are low—soared.

You can clearly see the massive scale of the 2010’s tech surge in the chart below, with tech shown by the benchmark ETF for the sector, in purple.… Read more

Believe it or not, your favorite income strategist once had a multi-year stint as the head of human resources for a US-based software company.

It was, coincidentally, my last regular “day job” before I drifted into the world of stocks and startups.

When my old boss, our managing director, handed me the task of hiring our new employees, he gave me this piece of wisdom.

“I trust you to make the call. Just one thing…” he winked at me.

“The kids must be graduates from Berkeley, Cornell, MIT or Stanford.”

Gee, thanks boss. Like it was an easy task to convince a new graduate from an elite engineering school to skip the offer from Google to work with us.… Read more

We’ve all loved watching our dividend payers soar since the August 5 crash. (To be honest, we might have liked a bit more time to shop the bargains!).

But that’s investing. And I do have two pieces of good news on that front:

1. There are still some cheap—and growing—dividends on the table (we’ll name one below, as well as a “dividend dog” to dump right away if you own it).
2. This latest market bounce is broad based, as opposed to most of the last couple years, when tech was running the show: 

Good “Breadth” Bodes Well for More Gains

Here we can see the jump in the S&P 500 as a whole (in orange) versus its return on an equal-weight basis (in purple).… Read more

Just a week ago, I wrote to you about the dangers of investing in a tired investor go-to called the 60/40 portfolio.

You know the one—the so-called “rule” that you should invest 60% of your holdings in stocks and 40% in bonds to reduce your overall volatility.

But investing this way—according to arbitrary standards like 60/40—is a recipe for leaving money on the table, especially when we’ve got a terrific way to get a much bigger dividend stream from stocks, which we’ll get to in a moment.

Your Odds of Long-Term Profits in S&P 500 Stocks? 100%

I’m coming back to this topic so soon because I recently read Ben Carlson’s fantastic analysis of the 60/40 portfolio.… Read more

AI is in and energy is out. As usual. Which is just dandy for contrarian dividend investors like us.

Let’s talk about dividends up to 6.6% and stock prices that are dirt cheap. How cheap? Stocks trading for as little as half their sales!

The best time to buy energy is before the next supply shortage. I was just “upwind” of Hurricane Hone on the Big Island of Hawaii—‘tis the season for storms. Plus we have a volatile Middle East. And an economy that may get a bit of juice as the Federal Reserve begins to ease.

The 2020s, make no mistake, are a bullish decade for energy.… Read more