{"id":24990,"date":"2011-11-06T19:17:05","date_gmt":"2011-11-07T00:17:05","guid":{"rendered":"http:\/\/countingpips.com\/fx\/?p=24990"},"modified":"2011-11-06T19:17:05","modified_gmt":"2011-11-07T00:17:05","slug":"four-ways-to-boost-yields-and-returns-2","status":"publish","type":"post","link":"https:\/\/www.investmacro.com\/fx\/2011\/11\/06\/four-ways-to-boost-yields-and-returns-2\/","title":{"rendered":"Four Ways to Boost Yields and Returns"},"content":{"rendered":"

By Carla Pasternak, <\/span>GlobalDividends.com<\/span><\/strong><\/a><\/p>\n

What’s the secret to building a strong high-yield portfolio? While there is no magic bullet, I do have some rules I follow to create portfolios that pay nearly double-digit yields and<\/span> see strong capital appreciation.<\/span><\/p>\n

On average, they’re yielding 7.6%. That’s nearly four times the yield of the S&P 500. Try getting that amount from a money market or savings account.<\/span><\/p>\n

But that’s not the half of it. In tandem with those high yields, the capital gains have been great too. The average total return for thirty-eight securities is 23.6%. The best performer has gained 131.6%, yet still yields 5.0%.<\/p>\n

This isn’t the performance of some secret index or an exclusive hedge-fund’s holdings. It’s what is currently happening within the portfolios of my High-Yield Investing<\/a><\/em><\/strong> advisory.<\/p>\n

What’s the secret to that sort of performance? How can you build a similar portfolio for yourself? Don’t get me wrong — I do an enormous amount of research and watch my holdings and the market like a hawk. But much of the good fortune comes from sticking to a few simple rules that you can use as well.<\/p>\n\n\n\n
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Over the years, these rules have proven their value in bull and bear markets. The techniques are not complicated. Anyone can follow them and potentially get the same results. So I wanted to share with you, my fellow income investors, the four basic rules I follow to build my winning High-Yield Investing<\/em> portfolios. I’m confident these tips can work for you as well:<\/span><\/p>\n

Rule #1: Look for High Yields Off the Beaten Path
\n<\/strong>
\nTo find exceptional returns and yields, I frequently venture off the beaten path. Some of the best yields I’ve found have come from asset classes few investors know about. A case in point is Canadian REITs. These REITs<\/a><\/strong> delivered exceptional yields this year (some as high as 12%), but many stateside investors have never heard of them.<\/p>\n

Other lesser-known securities I look at are exchange-traded bonds, master limited partnerships<\/a><\/strong> and income deposit securities<\/a><\/strong>. All of these usually yield more than typical common stocks. In addition, they can also be less volatile and hold up better during market downturns.<\/p>\n

If you’re not familiar with these securities don’t fret. I have — and will continue to — cover them within Dividend Opportunities<\/em>.<\/p>\n

Rule #2: Consider Alternatives to Common Stocks
\n<\/strong>
\nIt is a well-known fact that the vast majority of common stocks simply don’t yield much. The S&P 500’s average yield is only 2.0%.<\/p>\n

So when I can’t find the income I want from common stocks I like, I look elsewhere. My first stop is often preferred shares of the same company, which almost always yield more. Say you wanted to invest in General Electric (NYSE: GE<\/a>). The common shares of General Electric (NYSE: GE<\/a>) currently yield 3.7%, but you can find preferred shares of GE yielding upwards of 6.5%. You still benefit from the underlying company’s backing, but with a much higher yield.<\/p>\n

Similarly, many companies offer exchange-traded bonds. While you don’t get actual ownership of the business as you would with common stock, you will earn a much higher yield and have your principal backed by the underlying company.<\/p>\n

Rule #3: Look for Securities Trading Below Par Value
\n<\/strong>
\nSome of my highest returns have come from buying bonds when they trade below par value. Par value is simply the face value assigned to a stock or bond on the date it was issued. Most exchange-traded bonds (which you can buy just like a share of stock) have a par value of $25 per note.<\/p>\n

But sometimes — for instance, during a market panic — investors indiscriminately dump these bonds, pushing their prices down. By purchasing the bonds at a discount to par, you lock in great opportunities for capital gains in addition to higher-than-normal yields.<\/span><\/p>\n

A case in point was Delphi Financial Group 8% Senior Notes (which have since been called). I purchased the notes in July 2009 for $19.27 — a 23% discount to par value. During the 16 months I held, I collected $3.00 per note in interest payments while the shares rose to their $25 par value. In total, the notes returned over 45%.<\/p>\n

Rule #4: Sell When It’s Time
\n<\/strong>
\nThis rule may seem the most obvious, but it is also the most difficult to follow.<\/p>\n

Like everyone else, I hate to admit I was wrong about an investment. But I find it even harder to watch losses mount as a pick falls further. That’s why I’m not afraid to take a loss. I swallowed my pride and closed out several positions for losses during the last bear market, and I’m glad I did. Continuing to hold these would have greatly reduced returns on my portfolio.<\/p>\n

It may sound like a cliche, but knowing when to sell is just as important as knowing when to buy. A wise investor knows when to cut losses and move on to the next opportunity. If the security in question is falling with the market, I may not be worried. However, if changes in the company’s operations mean it could see rocky times ahead, I don’t want a part of it.<\/p>\n

[Note:<\/strong> The rules I’ve shared above should help guide you to higher yields and better returns — they’ve certainly done well for my High-Yield Investing<\/a><\/em><\/strong> subscribers. I hope you can put them to good use in the coming year. And if you’d like to learn more about High-Yield Investing<\/em>, including how to access my full portfolios, click here<\/a><\/strong>.]
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\n<\/span> Good Investing!<\/span><\/p>\n

\"\"
\nCarla Pasternak’s Dividend Opportunities<\/em><\/p>\n\n\n\n
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Disclosure:<\/strong> Carla Pasternak<\/span> does not own shares of the securities mentioned in this article.<\/span><\/span><\/p>\n","protected":false},"excerpt":{"rendered":"

What’s the secret to building a strong high-yield portfolio? While there is no magic bullet, I do have some rules I follow to create portfolios that pay nearly double-digit yields and see strong capital appreciation.<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[],"tags":[],"class_list":["post-24990","post","type-post","status-publish","format-standard","hentry"],"_links":{"self":[{"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/posts\/24990","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/comments?post=24990"}],"version-history":[{"count":0,"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/posts\/24990\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/media?parent=24990"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/categories?post=24990"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/tags?post=24990"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}