I bought on Friday and my Barron's arrived over the weekend and when I saw the headline I knew instantly they were talking about PHK. I thought the price was a bit lofty, but I also thought that the dividend was sustainable so even with a 5-10% correction in price, with reinvested dividends I felt, and still feel it's better than cash and I already have plenty of stock exposure. Feel free to tell me how stupid I am or why I should not worry that much.
Wow, self-delusion & stupidity really are everywhere.
At these premiums, you are paying them management fees to have your own capital returned to you. At a 70% premium, you will probably get back substantially less than what you invested.
And Bill Gross is a liar for not calling it like it is.
At least the Gabelli people are honest.
Do yourself a favor and at least read up on what a closed-end fund actually is.
I agree with most of what you say, chiq. But the management (gross) has really little control over what price premium it trades at.
And yes, most people dont know what a closed-end fund is.
They are paying for a pot of assets worth exactly $8.38 today (and not a penny more), plus they are paying approx $5 (approx 70% premium) to have pimco manage it for them. Other similar funds managed by pimco have a very small premium.
and they are paying pimco a management fee approx and expense fee, of over 1%, in addition to paying for commissions on buying and selling of assets in the fund.
This was not a scare article in Barrons, as some have described it, but an analysis of price, value, and the history of what has happened to overvalued funds in the past(this fund was first or second most overvalued over the past year or so)--ie, they have underperformed the market.
There are ZERO examples where they (high premium funds) have outperformed the market (ie their category) over time. If anyone has an example, please post it and prove me wrong. The cornerstone funds are just one of many examples of premium collapse resulting in substantial losses.
You are not stupid, just wrong. Junk bond closed end mutual funds move in the same direction as equities, so this is not the right investment to reduce your stock exposure. Having said that BND may be a bit better. Personally I buy Utility stocks and REITs to hedge, YES they are stocks also yet they often do not trade with the general market. Consider PHK as a part of your stock exposure and not Bond.
You will be fine you just ran into a paper Barron's trying to sell papers and be relevant. Hang in there, tomorrow will be another hit because it goes Ex Dividend. But at the end of the year you will be up a few points and collecting your checks.
You should NOT feel stupid. Its an investment, for all the people panicking and selling today there is someone buying, at some price. The alternatives in fixed income have not changed. I have had PHK in my portfolio for many years, adding additional shares on the dips. How many stocks do the naysayers have that have returned 12-15% (depending on your entry price) year after year? No fun to watch the volatility, but fear sells so that is why Barron/s WSJ, National Enquirer, do the panic articles. The roller coaster sometimes feels scary but as in real life hold on, scream a little, and have fun.