Most people on this board seem serious and knowledgeable so I am asking for some investment advice. ofcourse I have other sources but i would like to compare.
Suppose you have about $400,000.00 to invest. What do you guys think about parking it in a MLP like ETP and earning the 8% yield for 2 or 3 years? By my recokoning that is about $32,000 a year tax free. I understand that upon sale of my MLP shares this amount will reduce the basis used t calculate my capital gains.
Any thoughts on this? or is it better to buy a Microsoft like stock and earn the 3 % dividend yield, which ofcourse is taxable.
Your comments are welcome.
Break up your money with a couple MLP's and a couple REITs. I use NLY for the REIT portion along with HCN. Mlp's I like ae BTE EPT, BWP, BPL,and a couple others. I back these up with a few mining stocks, CAT, and keep some cash in muni's for tax free emergency money.
DIVERSIFICATION is the ONLY free Lunch. That said DoubleLine's Jeff GunRack is arguably one of the BEST bond managers out there if you stick with him long term. Vanguard also makes some cheap & '08 tested Bond funds & ETFs like VBMFX & VFIIX. Don't forget Divi stock fund idea too.
I like the blend mix of Equity Income funds, Utilities, Bond funds, MLPS, Royalty Tusts, REITS, BDCs. It's tough out there for a Divi Pimp. lol
like the others I would split it up. in addition to mlps such as etp, mwe, cpno, bbep, line, vnr, pvr, bwp, uan, oks, eroc, epd, bip, etc. In addition I would look at a closed end fund such as gabux that pays a approx 14% yield mostly as ROC like MLP'S. gabux has been paying a .07 month distribution since late 1999 and invests in domestic and international utilities, pipelines, etc. If you balance between say a gabux and some of the other mlps noted above you can arrive at a blended 8% or more, majority tax deferred for several years
do your own dd and good luck
My portfoilio consists of 36% MLPs, 13% Reits, 13% high yield bonds, 38% dividend paying stocks. Average yield over 8%; hold around 50 or so different companies. Has beaten S&P every year for the last 5 years; down only 5% when S&P was down over 10% this year.
I'd put half of it in some well-run bond funds with low expenses, like DBLTX (yield 8.49%) and PIMIX (yield 6.16%). In a bad economy, these will do well while MLP's could get killed. On the other hand, if commodities go up MLP's should do better while the bond funds might be a drag. Combined they hedge each other out. The bond funds have very low beta, while MLP's are high beta. I'd advise you to be conservative and spread your risk.
"I understand that upon sale of my MLP shares this amount will reduce the basis used t calculate my capital gains."
Not correct. There will be ordinary income tax too. Here is a summary of how it works.
As for the advice, I suggest not putting it all in one MLP but splitting it up among several.
DLTNX is paying 8.8% and is very safe. You are going to have to pay tax on the dividends received from ETP or DLTNX or anybody else unless you have the money in a ROTH IRA. Taxes are due in the year the dividends are paid.
I would advise putting a portion in a variety of MLPs and putting the majority in undervalued companies that have decent yields such as GE and MSFT. This would insulate you from possible bad news that may hit the MLPs or any other sector. Cyclical plays like GE and MSFT would also do well in the second leg of a bull market, which I think we are entering, since they are undervalued and will appear more undervalued as their earnings recover.