In this news article, the author shares their personal journey with high-yield investments, particularly closed-end funds (CEFs). They reveal how CEFs provided enough passive income for them to quit their job as a professor over a decade ago. This led to the creation of the CEF Insider advisory, where the author continues to advocate for the benefits of CEFs compared to other high-yield options.
The author discusses their experiences with different high-yield investment options like exchange-traded notes (ETNs), master limited partnerships (MLPs), and royalty trusts. They highlight the risks and drawbacks associated with these alternatives, such as empty assets, complex tax-filing requirements, and poor performance during economic downturns. The author advises caution when considering these investments due to the potential pitfalls they present.
The article shifts focus to business development companies (BDCs) as another high-yield asset class the author has explored. They emphasize the importance of assessing the quality of assets held by BDCs, particularly loans made to medium-sized businesses in the private credit market. The author provides examples of successful BDCs like Main Street Capital Corporation (MAIN) and TriplePoint Venture Growth BDC Corp (TPVG), showcasing their performance and dividend yields.
The author delves into the complexities of investing in BDCs, pointing out risks related to economic downturns, credit quality, and valuation of loan assets. They caution investors about the challenges associated with determining the value of collateralized assets held by private firms borrowing from BDCs. The author stresses the need for thorough research and expertise to identify high-quality BDCs that can provide consistent income while minimizing risks.
In conclusion, the author acknowledges the potential for earning good income through BDC investments but underscores the need for careful selection of quality picks to avoid negative impacts on returns. They emphasize the importance of due diligence and expertise in analyzing BDCs compared to more traditional investment options like stocks, ETFs, and CEFs. The article serves as a cautionary tale about the risks and complexities of high-yield investments, highlighting the need for informed decision-making to navigate these asset classes effectively.
