The market sell-off is continuing. The media bears and fear mongers are out in full force. It’s times like these that investors panic and make big mistakes. But please… Don’t make this mistake! After explaining this big mistake that should be avoided, we share 5 attractive high-yielders to consider, but only if…
The Big Mistake
The #1 mistake that investors make during market wide sell-offs (like the current one) is to turn their backs on their long-term plans and goals. Don’t know what we mean? Here are two examples. First, if your goal is lower risk income, don’t put 100% of your nest egg into high risk stocks because you think we’re “due” for a huge rebound. And two, if you have purchased a portfolio of stocks for long-term growth and income, don’t panic and sell everything out of fear (you’ll miss out on the long-term rebound when it arrives). However, in the short-term, no one knows what the market will do over the next few weeks or months. But over the long-term, if you’ve built a portfolio to meet your needs (whether that’s growth or income or some combination of both), sticking to your plan is the best option you’ve got. Diversified long-term investing is a proven strategy for achieving success. Short-term panic just raises your risks, raises your transaction costs, and causes you to get off track with regard to your goals.
Time to Rebalance?
With that said, and as long-as it is consistent with your personal investment plans and goals, now may be a decent time to consider rebalancing your portfolio. For example, if you have too many “safe” utilities stocks or too much cash on the sideline (relative to your long-term goals), then now may be a decent time to dip your toe into some of the higher income investments that have sold off hard. For example, if you recall the end of 2015 and into the first quarter of 2016, the market sold-off extremely hard, and it turned out to be a great time to buy some of the names that had sold off the hardest (i.e. babies were being thrown out with the bathwater).
For your consideration, here are detailed write-up for 5 high-yielders that have recently sold-off hard, and may be worth considering now, as long as it is consistent with your long-term goals…
1. Energy Transfer (ET), Yield: 10.3%
2. PIMCO Dynamic Credit and Mortgage (PCI), Yield 11.5%
3. Main Street Capital, Yield: 7.0%
4. Teekay LNG Partners, Preferred Shares (TGP.PB), Yield 10.3%
5. FerrellGas Partners 2020 Bonds, Yield: 12.1%
The markets have sold-off hard. And differing investors are reacting similarly but different. On one hand, there is a tendency to panic and sell everything. On the other hand, contrarians want to try to “bottom tick” the market and go “all in.” These contrasting reactions are similar because they are both wrong. Investors should always stick to their long-term plans and goals.
However, the market volatility has created some interesting opportunities to consider rebalancing your portfolios, so long as it is consistent with your long-term plan. For example, the five high-yield investments described in this article have sold-off particularly hard considering their businesses and big yields. Don’t ever panic (i.e. sell everything) and don’t ever be overconfident (i.e. go “all in” on an undiversified portfolio). Instead, be smart, be opportunistic on the margin (e.g. rebalancing where prudent), and always stick to your long-term plans and goals. Diversified long-term investing is a proven strategy for success.
Note: we currently own several of these five names. And for reference, you can view all of our current holdings here.