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Old 05-07-2022, 08:11 AM
 
1,895 posts, read 681,185 times
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Quote:
Originally Posted by mathjak107 View Post
If it goes back up ..

Suppose it doesn’t as it will need rates to get this low again ..,


Or maybe it won’t rebound at all because I bet each 10% payment is reducing the value of a share by the same amount with each ex. Div date.

It reaches a point like a reit I owned where it can never get caught Up ..it payed out to much and took to many reductions for the pay out .

This is two decades later and the reit has not reach its purchase price as share values fell so much over the years from the high payout.

I sold it a decade ago .

Some closed end funds pay rates like 10% but it includes principal too so the share value will eventually hit zero and you are still at a loss .

No one can pay 10% out today without consequences in share price reducing more and more
I know, I took a risk with this fund. I'm mostly in cash waiting for more fed increases this year so the CD rates to get higher before I get one. Thanks for your replies!
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Old 05-07-2022, 08:16 AM
 
96,860 posts, read 95,883,014 times
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Quote:
Originally Posted by wp169 View Post
I know, I took a risk with this fund. I'm mostly in cash waiting for more fed increases this year so the CD rates to get higher before I get one. Thanks for your replies!
It’s Importent to understand the hows and whys of an investment before posting how it pays out 10% and share price doesn’t matter .

People get the impression this is some magical investment , and you are right .

If they knew the name they would buy it too without understanding they may be getting less then their own money back despite the payments.

Hopefully they wouldn’t be spending it at that rate or they could jeopardize their retirement
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Old 05-07-2022, 08:18 AM
 
8,355 posts, read 3,489,432 times
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Quote:
Originally Posted by mathjak107 View Post
Not true ..most closed end funds have an automatic share price drop to match what was paid …they also tend to return principal reducing value .

Unless he sends me the fund you have no clue what they do


https://www.fidelity.com/learning-ce.../distributions
closed end fund also have management fees,but you pay for their knowledge of the fixed income market.
if what you said is correct,then with every paidout,it drops in price,would that end up zero eventually?
I came across a fixed income closed end fund symbol FAX which invests in fixed income securities of foreign sovereign and corporate bonds,most of them bear 2% rate.
I know rate will be rising then,but I am fascinated by the way they pick these bonds so I decide to take a small position just to follow up , my average cost is $3.64.now it is a shade over $3/share.
You are correct,all outstanding fixed income instruments take a beating in rising rate environment.
unless it is convertible ,one example would be NBR ,bondholders convert them to stock,as oil price keeps climbing,oil service company should do well and its common stock will climb)
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Old 05-07-2022, 08:22 AM
 
96,860 posts, read 95,883,014 times
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Yes , any stock or fund that pays a dividend will eventually hit zero in theory if the shares appreciate less then they pay out .

Share appreciation is what creates your returns and it must be enough to offset each reduction….

It would be silly to think any investment can pay out millions and not be worth less money after it.

A good investment appreciates enough to cover the reduction and then move on.

Some closed end funds are designed to run a number of years and eventually hit Zero as principal and any gains are paid out
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Old 05-07-2022, 08:26 AM
 
3,829 posts, read 1,947,562 times
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Quote:
Originally Posted by Lillie767 View Post
Anyone harvesting losses with an objective of rebuying after 31 days?
Sort of. A month or two ago, I had a couple of small losing positions that were getting close to the one-year holding limit for short term status. I decided to sell them at a loss to harvest that "short term" loss which will help offset short term gains and ordinary income (up to a certain limit) on my Federal taxes. Any excesses in short term losses can be carried forward to future tax years for use then.
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Old 05-07-2022, 08:29 AM
 
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thanks for the Fidelity link,it reminds me of MLP.
How retail investors love those oil and gas MLP like Kinder Morgan,Plains America pipelines.
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Old 05-07-2022, 08:34 AM
 
96,860 posts, read 95,883,014 times
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Quote:
Originally Posted by mojo101 View Post
thanks for the Fidelity link,it reminds me of MLP.
How retail investors love those oil and gas MLP like Kinder Morgan,Plains America pipelines.
Your weLcome

You see what you thought about closed end funds was not correct now
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Old 05-07-2022, 08:46 AM
 
Location: Phoenix, AZ
5,127 posts, read 3,110,013 times
Reputation: 13904
Quote:
Originally Posted by davebarnes View Post
What are the words on the cover of The Hitchhiker’s Guide to the Galaxy?
Don’t Panic.
Right.

And don't forget your towel.
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Old 05-07-2022, 08:48 AM
 
8,698 posts, read 11,685,484 times
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I sold most of my tech stocks earlier this year and I am glad that I did.

This being a retirement forum I know most of us don't have the time horizon for the "long term ", I want us invest with our eyes wide open.

It's noteworthy that this past week's sell off was in reaction to the Fed raising interest rate by 0.5%. Previously a similar sell off occurred when the Fed raised interest rate by 0.25%. Two data points draws a straight line. Now we know the trend. We also know the Fed will continue to raise interest rate 5-6 more times this year. We can see where the trend is going.

Brace yourself for a bumpy ride ahead.
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Old 05-07-2022, 08:48 AM
 
8,355 posts, read 3,489,432 times
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Investing in common stock of well managed profitable company is not the same as investiing in fixed income securities,if it pays you a good dividend ,usually no more than 35% of their earnings,it does not mean its stock price will eventually go to zero,if so,companies like Philip Morris,Altria,MMM,Honeywell of the world would have their stock price down to $0.
But I agree,if a common stock is paying you 10% dividend,you need to know WHY?
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