All posts by Michael Foster

These Snubbed Funds Crush the Market and Yield Up to 8.5%

Remember early February’s stock-market rout?

I know. Seems like a weird question. It was just a few weeks ago, after all. But many folks seem to have forgotten how stocks fell 10% from their 2018 high in a matter of days:

Amnesia Sets In

As you can see, the benchmark SPDR S&P 500 ETF (SPY) is already recovering, and stocks are now up 3.3% for 2018. That’s still well below the 8% climb we saw in January alone, but it’s a solid return, and it means more (formerly) skittish folks will likely trickle their cash into stocks, keeping the market buoyant.

But they aren’t putting their money in all sectors equally, and that’s where our opportunity comes in, starting with the 3 closed-end funds (CEFs) I have for you below, which are boasting some of their highest dividend yields ever—up to 8.5%!

What sector am I talking about? To answer that, we only need to look at this heat map of the S&P 500.

Where the Bargains Are

A quick glance tells us that consumer discretionary, financial and technology stocks are far outperforming the rest of the market, with year-to-date returns between 3.5% and 5.9%.

But we’re mainly interested in the red sectors—one in particular. And it’s not consumer staples.

That’s because the consumer staples selloff can best be understood as a “risk-on” move—staples, of course, are things people must buy all the time, so these stocks are attractive in tighter times. And since we’re in a time of growing incomes and falling joblessness, staples aren’t where you want to be.

That means the drop in consumer staples isn’t a great contrarian opportunity—it’s a falling knife. But when we compare ETFs benchmarking two other lagging sectors—the Energy Select Sector SPDR (XLE) and the Utilities Select Sector SPDR (XLU)—a terrific opportunity pops up.

Utilities Go Up, Energy Goes Down—Until Now

As you can see, it’s rare for utilities and energy to fall at the same time; they tend to be inversely correlated.

When you stop and think about this, it makes sense. Utilities sell energy they produce using fuels from oil and gas producers; higher profits in the oil patch, therefore, mean lower profits for utilities, and vice versa.

But as you can see, both sectors are headed down today—and that’s why utilities look so attractive: because they’re buying energy cheap while selling more of it into a surging economy!

And when you add in the fact that many utilities have something near a monopoly in their market, this opportunity gets better still.

3 Ways to Buy In

We could just buy XLU and call it a day. With a 3.5% dividend yield, we could feel satisfied that we’re getting utility exposure and a “set it and forget it” investment.

But you’d be leaving a lot of cash on the table when you stack up XLU next to those 3 high-yielding CEFs I mentioned off the top. They are the Reaves Utility Income Fund (UTG), the Cohen & Steers Infrastructure Fund (UTF) and the DNP Select Income Fund (DNP).

I’ve chosen these funds not only because of their strong historical returns, which I’ll get to in a minute, but also because of the quality of their management and their portfolios.

UTG, for example, has one of the best asset management teams in the utilities space, and UTF’s diversified portfolio across North American, Asian and European assets has protected investors from a major market downturn for years. Finally, DNP’s focus on high-yielding large cap US utilities and telecommunications companies provides stability and a dividend investors can count on.

Each one specializes in utilities and has beaten XLU’s dividend yield while matching—or even topping—the ETF’s performance since the 2014 commodity crash.

Topping the Benchmark—With Big Cash Payouts, Too

On a longer term basis, these funds have all crushed XLU.

Winning Out Over the Long Haul

But how do these funds’ dividend yields compare to that of XLU? Quite nicely.

The bottom line? Utilities have tremendous upside, and it’s only a matter of time till the market picks up on this. The 3 CEFs I just showed you are a great way to get in on the action.

4 Must-Buy CEFs for 2018 (Huge Cash Dividends and 20%+ GAINS Ahead)

Utilities aren’t the only shockingly cheap corner of the market resulting from the selloff. There are 4 more markets that are even better places for your money now. But you won’t find them by looking at the S&P 500 “heat map” above—they’re well off most investors’ radar screens.

But these 4 obscure markets boast cash payouts 4 TIMES BIGGER than what the average S&P 500 stock pays!

They’re plenty safe, and even more undervalued than utilities are now.

That means one thing: we’re looking at massive upside here, especially if you buy my 4 favorite funds—one from each of these 4 unloved markets—today: I’m talking 20%+ price gains in a year or less!).

AND you’ll collect an outsized 7.6% average dividend payout while you watch these 4 incredible funds’ share prices arc higher.

Please don't make this huge dividend mistake... If you are currently investing in dividend stocks – or even if you think you MIGHT invest in any dividend stocks over the next several months – then please take a few minutes to read this urgent new report. Not only could it prevent you from making a huge mistake related to income investing, it could also help you earn 12% a year from here on out! Click here to get the full story right away. 

Source: Contrarian Outlook

Buy This Dip for 8.7% Dividends and Massive Gains in 2018

There’s one income-producing sector you probably hold in your portfolio—and you may be wondering why it’s crashing out this year.

I’m talking about utilities, which are famous for their rock-steady dividends (and predictable dividend hikes). These companies literally power the economy. But if utilities are so important, why are they in the toilet while the rest of the market is on fire?

Investors Loathe Utilities

Before we go further, if you’ve noticed your portfolio’s utility sleeve taking a dive like the one above—or bigger—don’t worry. This dip is a buying opportunity! I’ll give you one option paying a fat 8.7% dividend below.

First, the big driver behind utilities’ plunge is the recovery in energy prices. Oil and natural gas are soaring after 2017’s bear market and the cold snap that kick-started this year’s commodity consumption. Higher energy costs hurt utilities’ profits, which, in turn, lowers their stock prices.

The Upside of Down

But if you’re an income seeker, this crash is an excellent opportunity to bulk up your income stream. Consider the Utilities Sector SPDR ETF (XLU), which is now yielding 3.5%, its highest level in over a year:

Utilities’ Income Rises

Let’s put some numbers behind this to understand what’s going on.

If you put $500,000 into XLU at the start of 2018, you would have gotten a $16,500 annual cash payout from the fund’s then-decent 3.3% dividend. But if you buy XLU today, you’ll get $17,350—a 5.2% raise! And that’s just because of a 0.2% increase in yield.

That is the power of dividends. And now I’m going to show you how we can kick that payout into overdrive.

Double Your Income in One Buy

There are a lot of funds out there paying a 6% dividend yield, or higher, while still investing in those same utilities XLU does. They’re called closed-end funds (if you’re not familiar with CEFs, click here for a quick and easy-to-follow primer), and they operate in an important way that supercharges their income stream.

The secret? Discounts.

When you buy $1 in XLU shares, you get $1 of XLU’s portfolio. That’s pretty straightforward. But CEFs are different: they often trade at a discount to their portfolio’s net asset value (NAV, or the market value of their holdings). And that makes their dividend yield even higher.

For instance, the Duff & Phelps Global Utility Trust (DPG) trades at an 11.5% discount to NAV—or its “true” value—which helps it cover a nice 8.7% dividend to shareholders.

Now let’s put some numbers behind this to see what we’re talking about. That $500,000 investment in XLU that paid $16,500 in annual cash dividends? Put it in DPG and suddenly you’re getting $43,450 a year. That’s a 163% raise!

Think there’s a catch? Let me put your mind at ease.

One of the first things investors do when they hear about a CEF is track its performance history. Do this with DPG, and things look bad. Let’s compare the price charts of DPG and XLU over the last year:

The Seeming Laggard

XLU is up nearly 4% while DPG is flat—a sucker’s bet, right?


The mistake most folks make is to look just at the price return of a fund and not the total return, including dividends. That’s because the media has trained us to obsess over the S&P 500, the Dow Jones Industrial Average and the Nasdaq 100—indexes that pay paltry dividends (you’ll get 2% on the S&P if you’re lucky). Paltry dividends don’t add much to total returns, which are the value of the dividend payouts and the price changes.

But CEFs typically yield 6% or more, so their dividends are a much more important component of their total returns. So now let’s look at a total return chart of DPG and XLU, including the dividends both funds paid out:

Laggard No More!

All of a sudden, DPG doesn’t look like a sucker’s bet anymore.

It’s a chronic problem with markets—a lot of investors do the most basic amount of research and give up. What exactly are they giving up? In this case, a 163% higher dividend, along with superior returns. If that isn’t a good enough reason to do deeper research, I don’t know what is.

So should you buy DPG now?

If you’re looking for a big income stream and you’re in it for the long haul, DPG is a good option. There are others, though. Some utility CEFs have bigger yields, and some have much better long-term returns than DPG. A basket of these funds, bought when their discounts are most attractive and their portfolios best positioned to guarantee their dividends, is ideal for most investors.

But, of course, as you’re shopping around for the right CEF, do make sure you look at total returns.

4 Better Buys Than DPG (Incredible Cash Payouts Up to 10.4%)

And I haven’t gotten to your best option yet: let me do the legwork for you.

In fact, I’ve already done it! And today I’m pounding the table on 4 bargain CEFs that hand you an average yield of 8.1% and even bigger upside (I’m talking gains of 20%+ here) than you’ll get from DPG in 2018.

One of these little-known picks hands you an astounding 10.0% payout and I expect it to be one of my biggest gainers in 2018, thanks to its massive discount to NAV. Just imagine banking an income stream like that while you watch your nest egg streak higher.

Editor's Note: The stock market is way up – and that’s terrible news for us dividend investors. Yields haven’t been this low in decades! But there are still plenty of great opportunities to secure meaningful income if you know where to look. Brett Owens' latest report reveals how you can easily (and safely) rake in 8%+ dividends and never worry about drawing down your capital again. Click here for full details!

Source: Contrarian Outlook 

These 2 Stocks Are Circling the Drain: Sell Now

The S&P 500 has already increased in value by over $1 trillion in 2018—and January isn’t even over yet!

What’s behind this incredible bull market isn’t euphoria or hysteria—it’s actually sound investing principles. As I wrote in a January 18 article, the bull market is being driven by the best possible trend: higher earnings and sales for America’s best companies, which is itself the result of improving economic conditions for everyday Americans.

Parties ultimately end, of course. And this one is no different—the bull market is being driven by a solid and reasonable belief that American companies will go up in value. But eventually that sound line of thinking will turn into a euphoria that creates a bubble—then a crash.

Fortunately, we aren’t there yet, and we probably won’t be for a couple years or so. Unfortunately, though, we are seeing some foolish investing decisions being made as a result of naive first-level thinking.

Today I’m going to show you 2 common mistakes—and 2 investments—that have captured the herd’s attention for all the wrong reasons. Read on to learn more about them, and how you can steer clear.

Mistake #1: Buying on Dividend Yield Alone

The Eagle Point Credit Company (ECC) pays an outsized 13% dividend yield as I write this and makes a simple claim: that its financial professionals know how to make money from obscure and complicated investments.

But that’s not the whole story.

It’s true that ECC is one of the biggest investors in collateralized loan obligations (CLOs), and it’s true that CLOs are very complicated. You can think of CLOs as derivatives that are a lot like the mortgage-backed securities that were at the heart of the financial crisis; ECC claims to understand these assets and can make a profit accordingly.

The real problem, though, is ECC’s sky-high fees.

Last quarter, ECC reported a 10.7% expense ratio. In other words, for every $1.00 in assets the company has, it takes out 10.7 cents per year in fees. ECC needs to make a 10.7% profit on its investments just to pay its managers—before shareholders get a penny!

Of course, before many folks even get to the fees, they see the juicy dividend yield I mentioned earlier, which has ranged to nearly 15% so far this year, and hit the buy button.

Juicy Income—At First Glance

Trouble is, that sky-high yield is because the stock’s price keeps falling.

ECC Not a Grower

Notice the huge drop in price over the last week? That’s because ECC issued new shares, diluting current investors’ ownership. Why would ECC do such a thing? They may want to release more shares to make more aggressive bets in the CLO market. It’s also true that more shares translates into more assets to manage, generating more fees for ECC.

This is definitely an investment to avoid.

Mistake #2: Ignoring History

It’s true that history doesn’t repeat itself, but it does rhyme, and in financial markets, rhymes on historical events are sometimes all the signal you need to stay away.

This is the case with Prospect Capital Corporation (PSEC).

I haven’t talked about this stock in over a year, because it was pretty clear that Prospect’s past mistakes were recurring, and that meant we would see the same chain of events as in yesteryear.

And that’s what 2017 delivered.

Let’s back up. PSEC is a business development company (BDC) that’s structured to give most of its income to shareholders. That’s why PSEC yields over 10% right now.

There are just a couple problems.

For one, the BDC world is getting extremely crowded. BDCs are a good idea—they pool together a lot of money from investors and then lend that money out to small and medium-sized businesses that can’t get loans easily from banks.

But BDCs are such a good idea that a lot of new ones have opened up in the last few years. It’s an easy way to make money if you have connections and access to capital, so the barrier to entry is low. That crowdedness has also resulted in profit margins shrinking for BDCs, in turn lowering the income most BDC shareholders have access to.

Meantime, the extremely illiquid portfolios that BDCs hold are nearly impossible to sell in a market panic, which further boosts their risk.

Those two reasons alone are good motivation to stay away. But many investors ignored them in the first couple months of 2017, which is why PSEC did this:

A Crowded Trade

If you were playing PSEC for the short term, this was great. Most PSEC holders aren’t, though—they buy for that 10%+ dividend and hold forever. Which is why PSEC shareholders aren’t happy now, as you can see from this chart:

A Steep Drop

Not only has PSEC’s price crashed since its big early 2017 run-up, but its dividend has been slashed by 28%, as well. Note that the majority of the price crash happened before the dividend cut. The market isn’t clairvoyant—but a lot of investors who looked closely at PSEC saw that its dividend coverage ratio had fallen below 100%, and it could no longer afford to pay its high payout to shareholders.

This wasn’t a shock; Prospect had the same problem in 2015. And it will have this problem again and again and again … causing the stock to keep crashing and the income stream to keep shrinking.

2 Takeaways to Protect and Grow Your Nest Egg

What can we learn from these 2 examples?

First, be suspicious of high dividends. While 7% or 8% yields can be sustainable in many cases, it’s very rare (but not impossible, as I’ll show you in a moment) for a 10% yield to be sustainable. The higher the yield, the more need for a careful analysis of how sustainable that dividend really is.

Second, we need to pay attention to history. Investors who took the time to look just a couple years back into Prospect Capital’s past knew to stay away.

The third, and perhaps most important, lesson relates to complexity. Some financial advisors urge clients to avoid investing in anything they don’t understand. This is silly. None of us really understand what goes into our iPhones, but that hasn’t stopped Apple (AAPL) from soaring.

Companies that produce financial products are no different. They provide a value and a service, and investors can profit from them even if they don’t understand the technicalities.

However, we must be able to identify and quantify the value a company provides, and how that value is changing. The real problem with ECC isn’t that its business is too complicated—it’s that ECC’s management earns too much money by charging shareholders for their services.

The bottom line? Find companies and funds that have management teams whose interests align with yours, a history of making the right decisions and a structure that rewards shareholders more than managers. When you do, you’ll find that massive profits come your way.

Michael Foster has just uncovered 4 funds that tick off ALL his boxes for the perfect investment: a 7.4% average payout, steady dividend growth and 20%+ price upside. — but that won’t last long! Grab a piece of the action now, before the market comes to its senses. CLICK HERE and he’ll tell you all about his top 4 high-yield picks.

Source: Contrarian Outlook 

3 “Sleeper” Funds Poised to Soar in 2018

If there’s one thing I love, it’s picking up on a “sleeper” income opportunity that first-level investors have walked right past.

And today I’m going to show you not one but three. And one of these stealth buys yields a safe, stable 9.5%.

So a $100,000 investment in this unloved fund would hand you a nice $9,500 in 2018, or a steady $2,375 when its dividends drop into your account every quarter.

I’ll have more to say about these 3 funds—all of which are managed by a real, live human—shortly, including why they’re a better way to go than a “dumb” index fund.

But right now, I will reveal that all 3 of these funds are in the utilities sector, which has itself been a sleeping giant in 2017. Even the “dumb” utility index fund, the Utilities Select Sector SPDR (XLU) has had a terrific year!

Utilities Pop in ’17

Note the two different numbers here. The blue line is XLU’s market price, or how much the price of a share has changed in 2017. The orange line is the total return price. As you can see, that’s a good 3.7 percentage points higher.

Why? Because a lot of XLU’s returns come in the form of dividends.

The fund’s 3.1% yield is high by today’s standards, but the nice thing is that utilities raise their payouts in the long run. That’s why XLU’s dividends did this in the last 20 years:

Payouts Keep Rising

This soaring dividend is possible because the companies XLU holds keep raising their payouts to shareholders. Take a look at this chart showing the dividends of the 3 biggest utility firms in America: NextEra Energy (NEE), Duke Energy (DUK) and Dominion Energy (D):

Payouts Rise—But the Ride is Bumpy

Notice how Duke Energy’s dividend actually collapsed in the mid-2000s? This isn’t because of a crisis in the utilities industry. This was a case of mismanagement—and that’s why picking individualutilities is risky.

It also shows the drawbacks of investing in utilities through an index fund like XLU. Because Duke is such a massive utility, the fund had to include the company in its portfolio, even if XLU’s managers thought it might run into trouble.

Luckily, we’ve got a third option: the 3 actively managed, utility focused closed-end funds (CEFs) I’ll show you now. Each one has an experienced pro (or team of pros) at the helm, giving us a muchbetter chance of avoiding dividend disasters. (If you’re unfamiliar with CEFs, click here for a complete primer on these high-yield investments.)

Better yet, we can get a much bigger income stream, like the fund I mentioned off the top that pays 9.5% now (it’s pick No. 3 below).

So without further ado, here are the 3 funds that should be on your list if you’re looking to add some utility exposure to your portfolio.

Fund #1: Big Total Returns and a Nice Discount

The first fund to consider is the Reaves Utility Income Fund (UTG).

This fund holds a ton of utilities and is well run, with a 9.6% annualized total return over the last decade, the best of all utility-focused CEFs. Plus, UTG pays a 6.1% dividend yield—a solid cash stream that’s nearly double what XLU gives us.

The best part? UTG has crushed the index:

Beating the Dumb Money

This strong outperformance shows UTG’s managers are more than earning their 1.7% fees (the returns of this fund, and all funds I show you, are after fees are paid out). That makes it a good fund to consider for utilities exposure.

Fund #2: Strong Returns on Sale

I wrote about the Cohen & Steers Infrastructure Fund (UTF) back on November 24, and since then shareholders have gotten a couple of treats. The first is the special dividend that shareholders are going to get at the end of the year, which boosts the fund’s forward yield to a juicy 8.8%! Despite those generous payouts, UTF has grown its net asset value (NAV, or what its underlying portfolio is worth) by 24.1% in 2017 on a total-return basis, far more than XLU’s 17% NAV gains for the same period.

UTF is also undervalued, with a market price that’s 9.3% lower than its NAV—but the fund traded at half that discount just a few months ago:

A Buy Window for UTF

A 20% capital gain isn’t out of the question for this fund in 2018, on top of its healthy income stream. That definitely makes UTF a utility CEF to consider now.

Fund #3: Bet on World Growth and Get 9.5% Income

Finally, let’s take a look at that fund I mentioned off the top—the one that pays out a 9.5% dividend yield. It also trades at a nice 4.8% discount to its NAV.

Why so cheap?

One reason, and one reason only: the market is stuck in the past. This fund, the Macquarie/First Global Infrastructure Fund (MFD), has had lackluster returns in the last few years due to the US dollar. The income from its investments is sound, but the US dollar had been getting stronger, which meant the foreign currency–based income MFD earns has been worth less and less in US-dollar terms.

Now take a look at this:

Weaker Dollar, Stronger Gains

The recent weakness in the US dollar has helped MFD’s income strengthen throughout 2017, and that’s resulted in more money flowing into the fund. But the weakness in the greenback isn’t over, which means MFD’s income stream is going to get stronger.

How do I know the US dollar isn’t poised for a turnaround?

Simple: the government said so.

Not only has President Trump said he supports a weaker US dollar, but the Federal Reserve has repeatedly said it wants to encourage more risk-taking investment in the American economy.

That means the Fed wants companies to take the dollars they’re sitting on and put them to use through building, investing and hiring. This lowers demand for the greenback, as we’ve seen throughout 2017. Expect this trend to continue—and expect MFD to benefit.

4 More “Sleeper Hits” With Dividends Up to 10.4%

Just a couple weeks ago, I released a fully updated FREE Special Report on my 4 favorite funds for 2018—and I made one last-minute addition I think you’ll love.

It’s a totally ignored CEF that boasts an incredible (and easily sustainable) 10.4% dividend payout! So a $100,000 investment would hand us a safe $10,400 a year in dividend payouts—or $2,600 every quarter!

Just imagine what that could do for your retirement.

There’s more: this unsung CEF is ridiculously undervalued—I’m talking about a 5.3% discount to NAV here. That doesn’t sound like much until you realize that this fund usually trades at a 1.7% premium.

That simply means we’ve got a nice gain already baked in when that “normal” premium returns—as it’s already starting to do!

That’s to say nothing about the “bonus” upside this 10.4%-paying income titan has, thanks to its other secret weapon: its top-notch management team.

In short, this crew has an eye for bargains unlike any I’ve ever seen: this CEF’s portfolio is made up of a basket of stocks with an average P/E ratio of 17.5—way lower than the S&P 500’s nosebleed 25!

Add it all up, and this unsung fund is lined up for EASY 20% price gains “on the side” in 2018.And I’ll say it again: we’ll still be collecting that 10.4% income stream along the way!

Editor's Note: The stock market is way up – and that’s terrible news for us dividend investors. Yields haven’t been this low in decades! But there are still plenty of great opportunities to secure meaningful income if you know where to look. Brett Owens' latest report reveals how you can easily (and safely) rake in 8%+ dividends and never worry about drawing down your capital again. Click here for full details!

Source: Contrarian Outlook

These 10%+ Dividends Will Get Chopped in 2018

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.

Below are 3 of the most dangerous dividends in the CEF space today. (And for the names of 5 more wobbly CEFs you need to stay away from in 2018, check out my new special report, “5 Toxic CEFs That Could Run Your Retirement.” I’ll give you a copy here.)

Dangerous CEF No. 1: An 11.7% Dividend on Borrowed Time

Let’s start with the Stone Harbor Emerging Markets Total Income Fund (EDI).

You might notice this fund now because it’s up 24.6% in 2017 alone—which makes it sound like a dream investment, especially when you add on the juicy 11.7% dividend.

But it’s just the opposite.

This year has been wonderful for emerging market funds, which is why my CEF Insider Foreign Sub-Index is up 22.2% in 2017:

Foreign Funds on Fire

There’s just one problem: go back further than the last year and you’ll see that EDI has performed really poorly. In fact, it’s up just 9.3% since its IPO, while the much better MS Emerging Markets Debt Fund (MSD) has gained 16.9% over the same period:

EDI Is No Winner

But the absent-minded market doesn’t care, since it’s priced EDI up to a 2.9% premium to its net asset value (NAV, or the value of the holdings in the fund’s portfolio), while MSD is priced at a whopping 10.5% discount to its NAV.

Why is the market overpricing the poorer-performing fund?

Simple: dividends. MSD’s yield is a “low” 5.7%, less than half of EDI’s 11.7%.

Trouble is, EDI is eating into its assets to maintain that payout, which is why its NAV is down a shocking 36.2% since its IPO. The lower that NAV goes, the harder it will be for the fund to maintain those payouts. That means a dividend cut is coming. And when it does, expect investors to flock for the exits, driving EDI’s price way down.

Which brings me to…

Dangerous CEF No. 2: A Pricey Fund Headed for Trouble

The Tortoise MLP Fund (NTG) trades at a 2.2% premium to NAV, even though it’s been delivering a crummy 1.2% annualized return since its IPO seven years ago.

And why is it being priced at a premium? You guessed it: dividends.

With a 10.2% yield, NTG is an income investor’s dream … on the surface. But like our first CEF dog, it isn’t earning its dividend from its investments, so it has to take money out of its assets to pay out that income stream to investors.

The result? A NAV chart that looks like the most dangerous ski slope in the world:

The Beginning of a Death Spiral

As with EDI, this decline in the fund’s NAV leaves it with less money to invest in the market. That, in turn, makes it harder to generate income to pay investors, and slowly twists the vice on its payout.

Since NTG has never cut its dividend—and has actually grown its payout several times—the inevitable dividend cut is going to shock NTG investors and cause panic selling. So don’t expect the premium to NAV the fund currently boasts to stick around for long.

Dangerous CEF No. 3: An 11.1% Payer With Built-in Losses

Another investor favorite that doesn’t deserve a place in anyone’s portfolio right now is the Miller/Howard High Income Equity Fund (HIE), which is also trading at a slight premium to its NAV (2.1% in this case).

This fund is a dog in so many ways, it’s hard to know where to start. But let’s go with the fact that its portfolio holds some awful assets that have done terribly in 2017, like Royal Dutch Shell (RDS.B), AT&T (T) and CenturyLink (CTL).

I also don’t like how the fund holds a bunch of business development companies, such as Ares Capital Corporation (ARCC) and Main Street Capital Corporation (MAIN), which means you’re paying fees to HIE to hold other investment companies that also charge fees to hold investments. Fees on fees are never good! That’s why the fund has done this since its IPO:

Fees on Fees Drag Down Returns

A bet on HIE is basically flushing money down the toilet. It’s down an average 4.3% per year since it started in 2014, yet the last two years (more than half the fund’s lifetime) have been stellar for the high-yield stocks HIE specializes in! Such underperformance is unacceptable.

Yet the market is pricing this fund at a premium. Why?

You guessed it again: dividends. This fund has an 11.1% dividend yield, and the income-starved hordes are overlooking its horrible track record and terrible portfolio because they crave that income. That makes HIE yet another fund to avoid.

Editor's Note: The stock market is way up – and that’s terrible news for us dividend investors. Yields haven’t been this low in decades! But there are still plenty of great opportunities to secure meaningful income if you know where to look. Brett Owens' latest report reveals how you can easily (and safely) rake in 8%+ dividends and never worry about drawing down your capital again. Click here for full details!

Source: Contrarian Outlook

This Could Earn You $2,500 in Monthly Income in 2018

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.

That’s right: a retirement-friendly 6% cash payout! Enough to hand you $2,500 a month on a $500,000 investment.

I know this sounds like a tall order, but it’s 100% achievable, even, dare I say, easy.

But before we go further, let’s spell out exactly what we mean by “diversification.”

For a lot of people, it simply means buying a fund that holds a lot of stocks, like the SPDR S&P 500 ETF (SPY). The thinking goes something like this: “I’ve got 500 stocks, so there’s no way I can lose a ton of cash, right?”


The problem is that this isn’t real diversification. Sure, you’ve got stocks in 500 companies—but you’re still holding only stocks. And the reality is that stocks go down more than any other investment during rough economic times.

In the chart below, we’ve got 6 asset classes that would give you a diversified portfolio if you held all of them. They are: US Treasuries, municipal bonds, preferred stocks, corporate bonds, high-yield (or “junk”) bonds and common stocks.

(You can go even further and add international exposure—including in the one part of the world I pounded the table on in my October 25 article—but for simplicity, we’ll keep the focus on the good old U.S. of A. today.)

Source:; all calculations are from recent peak to bottom prices during downturns from 1979–2017.

As you can see, the maximum loss from the highest level is massive for common stocks—a whopping 56.8% drop!

It’s no surprise that Treasuries see the smallest loss, since federal government bonds are the safest investment on earth. Municipal bonds are pretty close, so their similar decline makes sense. And corporate debt instruments—preferreds and bonds—are snugly in the middle, with junk bonds the worst of them all.

Again, no surprises here.

But what you should really pay attention to is how adding these different asset classes together protects your portfolio from a huge loss. Even if you don’t cash out during a bear market, like a lot of retirees were forced to in 2007–09, you still face an uphill battle to recover those losses.

Why? Because a 50% portfolio loss means you’ll need a 100% gain to make up for it! And if your stock portfolio fell 56.8%, you’d need 131.5% just to get back to where you started!

This is exactly why savvy investors don’t just buy stocks; you need a lot of different asset classes to protect your hard-earned—and hard-saved—cash.

Deciphering the Diversification Riddle

So let’s go ahead an address the question of diversification and the size of our return now—because the answer isn’t as straightforward as you’d think.

If you just buy passive index funds, the answer is, yes, diversification will depress your return. To demonstrate this, let’s go back to the indexes for these 6 asset classes and see how they’ve performed over the last 8 years.

The Clear Winner: Stocks

With gains more than double the average of our other 5 asset classes, the S&P 500 was the clear winner. So if you bought equal amounts of each of these assets in 2010 and held them to today, your profits would be 54%—much lower than you’d get from stocks alone:


So if you just diversify by tracking the indexes, you’re going to leave a lot of money on the table. That’s the price of smaller declines during bear markets.

But before you start questioning whether you should diversify into these other 5 investments at all, read on, because there’s a better answer—one that gives you the market-beating gains, income and downside protection I mentioned off the top.

I’m talking about…

The CEF Alternative

The answer to the diversification riddle is simple: skip the indexes and go back to the good old-fashioned strategy of picking winning funds managed by superior teams.

If that sounds outdated, keep in mind that this approach not only yields a more diversified portfolio but also a superior return relative to just buying the indexes. It also delivers a higher income stream, to the tune of $2,500 a month on a $500,000 investment!

This, by the way, is why billionaires and professional investment managers prefer this approach to the passive index fund craze the middle class is being herded into.

And the best way to do it is through closed-end funds, or CEFs. (If you’re unfamiliar with these funds, click here to check out my complete primer on them—including how they can triple your income and give your gains a continuous yearly boost.)

CEFs are a small group of funds that provide a large income stream while delving into other investments that go well beyond stocks. And the best ones offer superior returns, too.

To prove this, I’ve taken a top-notch fund from each asset class and blended them into a diversified portfolio.

These funds are: the Western Asset Managed Municipals Fund (MMU) for muni bonds, the JH Tax-Advantaged Dividend Fund (HTD) for stocks, the PIMCO Corporate & Income Opportunity Fund (PTY) for corporate bonds, the Neuberger Berman High Yield Strategies Fund (NHS) for junk bonds and the JH Premium Dividend Fund (PDT) for preferred stocks.

There isn’t a CEF for US Treasuries, so to pick up that part of the portfolio, we’ll add the iShares 20+ Year Treasury Bond ETF (TLT). That gets us a 6-fund portfolio with exposure to all the major asset classes the smart money focuses on.

Now, if we had bought these 6 funds 8 years ago, what kind of returns would we have bagged?

The answer: big ones.

Massive Returns Across the Board

This “best-of-breed” portfolio includes 3 funds that crush S&P 500 index funds, and all 6 funds beat their indexes. On average, this portfolio delivered a 154.2% total return!


Not only is our diversified CEF investment giving us the diversity we need to avoid the extreme crashes that strike common stocks, but we’re also getting a superior return—154.2% versus the S&P 500’s 142.5%.

We’re also getting a superior cash flow from this portfolio, too. On average, these funds pay a 6% dividend yield, so we’re getting a bigger income stream than the S&P 500 while also facing a lower risk of a major loss.

The bottom line? Not only is diversification an important defense, but it can also be an incredible offense that boosts your wealth.

Michael Foster has just uncovered 4 funds that tick off ALL his boxes for the perfect investment: a 7.4% average payout, steady dividend growth and 20%+ price upside. — but that won’t last long! Grab a piece of the action now, before the market comes to its senses. CLICK HERE and he’ll tell you all about his top 4 high-yield picks.

Source: Contrarian Outlook

3 Exploding ETF Trends (and 33 Funds You Can Buy Now)

If you’re like most folks, you probably think it’s tough for any fund to beat the S&P 500, especially in a year when the index jumped some 15%.

But you’d be wrong.

Truth is a lot of funds are doing better, with over 660 beating the S&P 500. And the top-performers share 3 common themes that could tell us a lot about which sectors are poised to take off next year.

Let’s dig in. Along the way, we’ll hone in on the 33 funds that are cashing in as these breakthrough trends head higher.

Trend No. 1: Skyrocketing Faith in Technology (11 Funds)

Markets have always believed that technology will improve the global economy. But every once in a while investors get too excited and see value in all the wrong places.

A classic example? The boom and bust of dot-com IPOs in the late 1990s. The market was right about the Internet changing the world, but it failed to pick the winners and losers.

So we shouldn’t treat the market’s latest bets as gospel. But the trend is clear: bitcoin, hardware and biotech are the real game changers now.

That’s why the Bitcoin Investment Trust (GBTC) is by far the biggest winner of 2017, with 477.5% gains so far. That’s way ahead of the other winning tech ETFs, though many have clocked impressive returns, too:

If you missed the bitcoin wave but still put your money in tech ETFs, you did very well as long as you chose the ARK Innovation ETF (ARKK), ARK Web x.0 ETF (ARKW)Global X Lithium & Battery Tech ETF (LIT), ARK Genomic Revolution Multi-Sector ETF (ARKG)Global X Robotics & Artificial Intelligence ETF (BOTZ), Virtus LifeScience Biotech Clinical Trials ETF (BBC), MG Video Game Tech ETF (GAMR), ARK Industrial Innovation ETF (ARKQ), Global X Social Media ETF (SOCL) and SPDR S&P Biotech ETF (XBI).

These funds are all over the place, betting on social media, biotech, battery technology, genomic research and video games. What they have in common is a belief that many technological revolutions are starting now—and there are identifiable companies that will profit.

Trend No. 2:  Greenback Slump Spurs Emerging Markets (19 Funds)

It’s no secret that the US dollar has had better times. After a bull run through 2015 and 2016, the greenback has given up a lot of those gains to emerging market currencies, the euro and even the post-Brexit pound. If you bet on a stronger dollar through, say, the PowerShares DB US Dollar Bullish ETF (UUP), you probably aren’t happy:

Dollar Droops, UUP Dives

On Wall Street, a lot of analysts and traders made the mistake of betting on a dollar recovery in the middle of the summer. Boy, were they wrong! And while that’s not good for Americans looking to vacation abroad, it’s been great in other parts of the globe, particularly emerging markets and Asia.

So great, in fact, that many China- and emerging market–focused ETFs are up over 50% and a few are close to that mark. This emerging-market strength has also benefited Germany, whose euro currency is getting stronger; the country also sells lots of technology to China.

A ton of winners here, so let’s list them:

Columbia India Small Cap ETF (SCIN)
EMQQ Emerging Markets Internet & Ecommerce ETF (EMQQ)
First Trust China AlphaDEX ETF (FCA)
Global X China Consumer ETF (CHIQ)
Global X China Materials ETF (CHIM)
Guggenheim China Real Estate ETF (TAO)
Guggenheim China Technology ETF (CQQQ)
iShares MSCI Austria Capped ETF (EWO)
iShares MSCI Brazil Small-Cap ETF (EWZS)
iShares MSCI China ETF (MCHI)
iShares MSCI Germany Small-Cap ETF (EWGS)
iShares MSCI India Small-Cap ETF (SMIN)
iShares MSCI Poland Capped ETF (EPOL)
KraneShares CSI China Internet ETF (KWEB)
PowerShares Golden Dragon China ETF (PGJ)
VanEck Vectors Brazil Small-Cap ETF (BRF)
VanEck Vectors India Small-Cap ETF (SCIF)
WisdomTree China Ex-State-Owned Enterprise ETF (CXSE)

There have been so many foreign-ETF winners that it’s been tough to pick a loser! All you had to do was see that the dollar’s recent gains couldn’t last after an unprecedented run.

Trend No. 3: Fear Is Disappearing (3 Funds)

The third big trend is, paradoxically, the one that has scared a lot of people. And that’s because a lot of people aren’t scared.


It’s an old belief that’s the cornerstone of contrarian investing. The idea is simple: bubbles form when everyone gets greedy, no one is fearful, and asset prices get too pricey. The market has definitely moved away from fear. No evidence of that is clearer than the VIX.

The what?

The VIX, or the CBOE Volatility Index, is a measure of S&P 500 price fluctuations. A higher number represents more uncertainty—that is, more fear. A lower number represents more confidence that a crash is unlikely.

The VIX is currently at 9.95, far from 13.75 a year ago, really far from its long-term average of 18.7 and even further from its all-time high of 67, in the midst of the financial crisis.

The VIX: A Picture of Tranquility

While a lot of pundits have spent 2017 warning that the VIX is due to rise “any day now,” anyone betting that the opposite would happen has made out like a bandit. Just behind bitcoin, the best performing ETFs of 2017 have been short volatility:

Michael Foster has just uncovered 4 funds that tick off ALL his boxes for the perfect investment: a 7.4% average payout, steady dividend growth and 20%+ price upside. — but that won’t last long! Grab a piece of the action now, before the market comes to its senses. CLICK HERE and he’ll tell you all about his top 4 high-yield picks.

Source: Contrarian Outlook