{"id":37445,"date":"2023-11-28T15:24:31","date_gmt":"2023-11-28T15:24:31","guid":{"rendered":"https:\/\/microloannexus.com\/investing\/how-economic-grumpiness-will-hand-us-a-sweet-9-8-payout\/"},"modified":"2023-11-28T15:24:32","modified_gmt":"2023-11-28T15:24:32","slug":"how-economic-grumpiness-will-hand-us-a-sweet-9-8-payout","status":"publish","type":"post","link":"https:\/\/microloannexus.com\/?p=37445","title":{"rendered":"How \u2018Economic Grumpiness\u2019 Will Hand Us A Sweet 9.8% Payout"},"content":{"rendered":"
\n

Here\u2019s something you might be surprised to hear: according to the numbers, the US economy is actually doing well\u2014and yet (almost) nobody wants to admit it!<\/p>\n

It\u2019s a misconception we income investors can exploit with the three high-yielding picks we\u2019ll cover below.<\/p>\n

It\u2019s a weird turn of events, but it makes sense. Since the pandemic, itself an event of shocking turmoil, it seems that the chaos around the world is getting worse, and our fundamental hope for humanity makes us think that this just can\u2019t be good for growth.<\/p>\n

Except that\u2019s not how things typically play out.<\/p>\n

After World War II, the US economy grew 3.8% annually, on average, for over two decades, far more than the 1.7% average we saw in the following 41 years as the world grew more stable following the end of the Vietnam War, the fall of the Soviet Union, and with growing trade with China and so on.<\/p>\n

That is, until September 11, 2001, ushered in greater uncertainty \u2026 and America\u2019s GDP suddenly grew by an annualized 4.5%.<\/p>\n

I don\u2019t know why this happens\u2014no one does. But it\u2019s a pattern that has played out for over a century in many different ways. I\u2019m just giving you a very broad stroke here.<\/p>\n

<\/fbs-ad><\/p>\n

So, it kind of makes sense that the economy is poised for more growth as we face more uncertainty, tragedy and worry. Maybe it\u2019s because all of those bad things spur people to find solutions, and many of those solutions result in more spending and prosperity.<\/p>\n

That\u2019s not just a hopeful vision for the future\u2014it\u2019s one we can make money from.<\/p>\n

How to Invest in the Future Now<\/h2>\n

The dissonance between economic indicators and public perception, as outlined in a recent Wall Street Journal<\/em> article, has crafted a silver lining for astute investors: the stock market is relatively cheap.<\/p>\n

The stock market\u2019s current valuations, due to pessimism, beckon a rare opportunity to capture value. It\u2019s time to navigate through this juxtaposition by exploring three funds, ranked from worst to first, we can use to profit.<\/p>\n

Pick No. 3: SPDR S&P 500 ETF Trust (SPY
\n PY
\n <\/fbs-ticker>
\n SPY
\n <\/fbs-ticker>)<\/h2>\n

A common holding in a lot of investors\u2019 portfolios, SPY mirrors the S&P 500, offering broad exposure to the US economy with very low management fees.<\/p>\n

However, because SPY is an ETF and not a closed-end fund (CEF)\u2014more on those next\u2014it never trades at a discount to net asset value (NAV, or the value of the stocks in its portfolio).<\/p>\n

That, plus a modest dividend yield below 2% somewhat dull its shine. SPY\u2019s appeal lies in its replication of the broader market\u2019s performance, yet the absence of a significant income component leaves us cold. Our runner-up doesn\u2019t have that problem.<\/p>\n

Pick No. 2: Liberty All-Star Equity Fund (USA)<\/h2>\n

USA takes the income story to another level while also offering its portfolio of US mid-cap and large-cap equities for less than their actual value on the market today.<\/p>\n

That\u2019s because it\u2019s a CEF sporting a 3.1% discount to NAV and a hefty near-10% dividend yield as I write. It not only holds large caps like Alphabet (GOOGL), Visa (V)<\/strong> and Microsoft
\n
\n MSFT
\n <\/fbs-ticker> (MSFT),<\/strong> but it lets investors buy at a discount while yielding 9.8%, with a payout growing at the same rate as that of the S&P 500\u2014up about 60% in the last decade. (Note that this fund and our #1 pick, up next, pay dividends as a percentage of their portfolio value, so they do float around a bit. But that\u2019s fine with us. We\u2019re happy to let these well run CEFs \u201cconvert\u201d our gains into cash!)<\/p>\n

That makes it a smart buy now, but it\u2019s not quite as good of a deal as our best buy of this trio:<\/p>\n

Pick No. 1: Liberty All-Star Growth Fund (ASG)<\/h2>\n

Our next buy is USA\u2019s sister fund, ASG, which also shines with a rapidly closing discount and an 8.6% yield. But unlike USA\u2019s broad market approach, ASG, a holding of my CEF Insider<\/em> service, has a focus on growth stocks like SPS Commerce (SPS),<\/strong> a supplier of software for managing supply chains, as well as large caps like Amazon.com (AMZN),<\/strong> Visa and UnitedHealth Group
\n
\n UNH
\n <\/fbs-ticker> (UNH).<\/strong><\/p>\n

The market suddenly realized ASG was oversold a couple weeks ago, effectively suggesting that CEF investors\u2014who tend to be more cautious than stock investors\u2014are ready to admit today\u2019s pessimism is overblown. After all, ASG has a long history of outsized returns!<\/p>\n

If CEF investors are waking up to how overdone their worries about the economy have been, this is good for CEFs across the board. It also means ASG\u2019s discount is destined to vanish, bringing back the 8% average premium <\/em>at which the fund traded in the half decade before last year\u2019s selloff.<\/p>\n

That sets up a nice window to buy now, collect ASG\u2019s high payouts and then sell when it returns to its historical premium.<\/p>\n

Michael Foster is the Lead Research Analyst for <\/em>Contrarian Outlook<\/em>. For more great income ideas, click here for our latest report \u201c<\/em>Indestructible Income: 5 Bargain Funds with Steady 10.9% Dividends.<\/em>\u201d<\/em><\/p>\n

Disclosure: none<\/em><\/p>\n<\/div>\n

Read the full article here<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

Here\u2019s something you might be surprised to hear: according to the numbers, the US economy is actually doing well\u2014and yet (almost) nobody wants to admit it! It\u2019s a misconception we income investors can exploit with the three high-yielding picks we\u2019ll cover below. It\u2019s a weird turn of events, but it makes sense. Since the pandemic,<\/p>\n","protected":false},"author":1,"featured_media":37446,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[49],"tags":[],"class_list":{"0":"post-37445","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-investing"},"yoast_head":"\nHow \u2018Economic Grumpiness\u2019 Will Hand Us A Sweet 9.8% Payout | Micro Loan Nexus<\/title>\n<meta name=\"description\" content=\"Here\u2019s something you might be surprised to hear: according to the numbers, the US economy is actually doing well\u2014and yet (almost) nobody wants to admit\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/microloannexus.com\/?p=37445\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" 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