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Anybody Familiar with this Method?
Old 11-08-2019, 05:31 PM   #1
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Anybody Familiar with this Method?

Has anyone read this book, or are you familiar with their work (Brett Owens & Tom Jacobs)?:

How to Retire on Dividends: Earn a Safe 8%, Leave Your Principal Intact

I guess the gist of it is investing in closed-end bond funds and REITs, etc. I just skimmed the portion they allow you to see on Amazon.

Sounds interesting (but the last time I owned a REIT I hated it because it did absolutely nothing).

What's the deal with closed-end bond funds? Anyone here invest in them?
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Old 11-08-2019, 06:11 PM   #2
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to concept yes , the book , no

*** Sounds interesting (but the last time I owned a REIT I hated it because it did absolutely nothing) ***

did that REIT pay regular returns or just keep asking for more cash ?

i use REITs ( mainly ) for regular , fairly predictable income SOME actually have a share price rise to boot , but that is not why i bought them , so they are held as a substitute for bonds in my portfolio ( well since 2016 )

ALL investing involves risk , just because it is a one in a million chance , it CAN happen to you , or you would never buy a lottery ticket or take out insurance

bond funds , not me , i LIKE to read through the heaps over paperwork to know exactly ( well as close as possible ) what i am getting into , so i examine EVERY bond i buy individually , and buy or sell it myself , ( and that is why i have minimal expoure to this area currently , nothing meets my requirements , so why would i pay a manager to buy what i wouldn't ) ( i hold ETFs but still wade through all the paperwork and resist bond/hybrid debt exposure in them as well )

in 2011 to 2015 in had a very nice time investing in debt/bonds but that was then, money supply was tighter and i was getting paid for the risk taken
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Old 11-08-2019, 06:38 PM   #3
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I use closed end bond funds for a portion of my fixed income. Yes, they pay a lot. 9% for example for PFN. Yes, they bounce around a lot. Yes, they have risk. Know what your buying and don’t concentrate too much in it.
On another site I frequent, there are people that have all their assets in them. Not for me, but some folks do it. Pimco seems to be the king.
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Old 11-09-2019, 07:02 AM   #4
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If it was possible to earn 8% risk free, everybody would be doing it.

And the authors wouldn't need to sell a book.
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Old 11-09-2019, 07:06 AM   #5
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Earn a Safe 8%
If that's in the title, run away.
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Old 11-09-2019, 07:55 AM   #6
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If that's in the title, run away.
+1

I've never bought a closed end bond fund. I could individual bonds directly. A closed end fund gives me diversification. Does it do anything else?
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Old 11-09-2019, 08:20 AM   #7
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I have to ask myself, just what bonds is the CEF buying to get an 8% return? And are those the kinds of bonds that I would buy?

The yield of most junk bond funds are less than 8% so it has to make me wonder what the underlying investments are.
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Old 11-09-2019, 09:45 AM   #8
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+1

I've never bought a closed end bond fund. I could individual bonds directly. A closed end fund gives me diversification. Does it do anything else?
They have all kinds of tools in them, swaps, leverage, some even have equities.
I am not advocating for them, but ponder what a good manager with all the levers available to them could do and that is a closed end fund. All they need to do is generate slightly more than they pay out.
A well run business returns 15%-20% on assets. So it’s not that hard to ponder a CEF generating 10%.
Like I said up thread. I own two, a muni and a taxable. They pay great dividends, just know what you’re buying. They aren’t something to fear. Thousands of people own them. Good brokerages like Fidelity provide good screening tools.
I only have about 3% of my fixed income in them, but they generate the same cash flow of a 10% position in something more traditional.
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Old 11-09-2019, 10:31 AM   #9
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... Earn a Safe 8%, Leave Your Principal Intact ...
I have a slide where I tell my investment class students this: "There is no magic. There is no secret sauce." And another one where give them this Rule of Thumb: "The more complicated an investment product is, the more likely it is that it was designed to make money for the seller, not to make money for you."

In discussion, I tell them that there are thousands of products out there that are impossible to understand and very complex. Among those thousands of frogs there may be one who is actually a prince. But how many frogs are you willing to kiss, looking for the prince, when every kiss costs you time and money?
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Old 11-09-2019, 11:03 AM   #10
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Closed end funds are an interesting breed. Unlike their open end cousins, they have a fixed number of shares and so their net asset value can and usually does deviate from their market value. Thus, they will often trade at a discount to net asset value or sometimes at a premium. The managers often employ a variety of techniques to enhance returns. Management fees are often much higher than open end funds which suggests to me that 8% returns from closed end bond funds involve some more esoteric means of enhancing yield. Such methods may be good in certain types of markets but fail if the market changes abruptly.
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