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Friday Fixed Income

Every Friday, I present three fixed income options.

music selection:  “The Wasp” — The Doors

We are experiencing an official 10% or greater “correction” in the markets.  At times like these, fixed income investments really shine.  Now is a good time ask yourself if the current market action is making you feel ill.  If so, the most likely reason is your allocation to equity is too high and your allocation to income is too low.

On paper, I’m taking a beating in the correction.  I continue to sleep well at night however as I know more than my entire budget is met by dividends, distributions, and interest income that I earn passively.  The market could go a decade or more with a recovery and I’d be just fine.  That peace of mind is worth have a small drag on portfolio performance.

Below are three new ideas in the Closed End Fund debt space that are yield rich and offer attractive pricing.

Advent Claymore Convertible Securities (AGC) is a closed end fund that seeks total return through investing in convertible and non-convertible securities as well as following an options writing strategy.

  • Discount to NAV – 10.05%
  • Yield – 9.84%
  • Effective leverage – 40.91%

Wells Fargo ADV Multi-Sec (ERC) is a closed end fund that seeks high current income while reducing exposure to domestic interest rate risk by investing in foreign debt securities and preferred shares.

  • Discount to NAV – 8.57%
  • Yield – 9.95%
  • Effective leverage – 23.94%

Next Point Credit Strategies (NHF) is a closed end fund that seeks current income with capital appreciation through investment in floating and fixed rate loans, bonds, debt obligations, mortgage backed and asset backed securities, collateralized debt obligations and equities.

  • Discount to NAV – 7.72%
  • Yield – 10.14%
  • Effective leverage – 14.77%

Devour your prey raptors!

{ 6 comments… add one }
  • Chomper February 11, 2018, 3:13 am

    The 2008 crash is what change my mindset to focus on building up income at the expense of maxing out my yearly total return. IMHO its 100% worth it. I’m up to roughly $28k per year in qualified dividends now, which is a gigantic stress reducer.

  • Jrbroker February 12, 2018, 3:19 pm

    Raptor

    I totally agree with you, I own MORL with 8% of my portfolio since June 2015 and the dividends are always there, they do fluctuate but I have never received less than 16% annually

    Now , about the funds you are posting, the big question here is, is there any chance that these funds go under with a market correction ? How safe are they?

    Thx

    • The Lizard King February 12, 2018, 3:35 pm

      These funds are all primarily debt instruments. Theoretically safer than equity. Or at least, non-correlated.

  • Mr. Tako February 12, 2018, 6:56 pm

    Love these posts Financial Velociraptor, but would really appreciate expense percentages, and links to more detailed info!

    Thanks!

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