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Investius Interview: “Tax Sensitive Ideas”

by on August 1, 2015

9-16-2015 9-21-38 PM

Beyond municipal bond funds, tax-sensitive closed-end fund investors may want to consider MLP and covered call funds, says John Cole Scott of CEF Advisors.


We’re talking about tax-sensitive investing.  Give us your thoughts.  A lot of tax-sensitive investors automatically go into municipal closed-end funds.  What are some other ideas you may want to suggest?

John Cole Scott, CEF Advisors

While being in muni bonds is great from an investment grade, quality-based hedge against equity markets, there are other ways to get yield, where if we think rates are going to go up, it won’t have any negative impact in general scenarios for investors.  So, one of the best places now is MLP funds.  MLP yields don’t go down because rates went up and the cost of borrowing went up.  They go down because the company over-leverages itself because they’re not run well.

So it’s interesting. Just this morning two MLP funds raised their dividends by about one and a half percent.  MLP funds right now are about a 9 discount but you have a handful of 12, 13, 14, 15-plus.  They’ve got a yield of about almost 8 percent on average as a group.  And you have a good number of funds north of that, so if you pick a diversified mix of MLP funds, hold them for over a year, you’ve got at worst case short-term capital gains on the yield and you don’t pay that… taxes… until you sell the investment.


What about the risk, again, of problems with oil prices?

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