August 25, 2008 – by Richard Band
As you may know, Barak Obama is committed to a 28% capital gains increase–that’s almost double the current rate! Investors who are trying to build up their retirement savings through dividend stocks or by selling assets in the future will see the value of their retirement portfolios shrivel.
And this capital gains hit couldn’t come at a worse time.
The dual downturns in the stock market and the housing market have already upended the plans of baby boomers and retirees. According to a study commissioned by Americans for Secure Retirement, “Almost three out of five new middle-class retirees will outlast their savings unless they live more modestly after they quit the work force.”
Ernst & Young puts it in even starker terms: “…many retirees will have to cut back far more on expenditures than they had ever expected. …The risk of outliving one’s assets is quite high.” But you don’t have to wait around and take the hit. There are some investment strategies you can put in place to protect your assets.
Look What Happened to this Dividend Fund
For instance, take a look at what happened to the iShares Select Dividend Index Fund (DVY), which tracks the performance of stocks that pay the highest dividend yields. As of this writing, it’s down 24%, about double the decline of the market as a whole. And the steepest part of that fall came after June 1, when it was clear that Obama had defeated Hillary Clinton for the Democratic nomination (see also, “Red Stocks, Blue Stocks“).
That tells you that investors are already bracing themselves for the capital gains hit that will happen if Obama is elected.
So what’s the alternative? Tax free munis?
If your retirement portfolio has been knocked down this year, that’s no way to build it back up. You see, safety is only part of the solution. The other part is growth. SAFETY and GROWTH are both essential elements. In fact, I’ve focused on safety and growth for the 19 years I’ve been writing Profitable Investing–the most successful investment newsletter for low-risk growth. I’ve helped my subscribers build wealth through the most turbulent markets–and today’s market is no exception.
As an investor in today’s market, you don’t have the luxury of passively waiting around to see if capital gains taxes are raised 60% or 70% or 100%. Nor can you take undue risks (see also, “Election Season: A Great Time to Sell Stocks”).
An Investment Opportunity that Offers You Protection and Profits
And that’s why I’m happy to say I have found a number of opportunities that will not only protect you against the big capital gains increase but also bring you handsome profits. I’m very excited about one opportunity in particular…
This group of stocks will give you regular cash you can count on, plus put you in a perfect position for capital growth. It’s part of an investment class called Master Limited Partnerships (MLP). MLPs were introduced to the market only 25 year ago. They’re investment tools that give investors many of the advantages of limited partnerships, yet trade just like stocks. In the case of my recommendation, it trades on the NYSE.
And when you look at what’s been happening recently with MLPs, in general, you notice something interesting. It’s not just the MLP insider I mentioned buying up his company’s stock. In just the first 3 months of this year, insiders have been snapping up their own MLP stocks like fashionistas at a designer close-out sale! From January to March, they’ve bought $59 million of their own stock! (see also stock buy backs)
What gives? Why MLPs? Why now?
It’s Money in Your Pocket Every Quarter
Almost all MLPs are energy-related (oil and natural gas) pipelines that distribute oil and gas throughout the country.
MLPs pay healthy dividends–called cash distributions–that put money in your pocket every quarter. And MLPs aggressively aim to keep increasing the amount every year. The MLP I’m recommending pays an 8.3% cash distribution. In times like these, it’s nice to know you can count on at least a 7% return on your money no matter what! It’s even a step up from Treasuries that pay about 4%. In addition, MLPs are excellent defensive investments during tough times (see also, “Survive the Tax Bomb with These 5 Stocks“). They have outperformed the broader market in three of the last four economic slowdowns.
MLPs are essentially toll collectors. They collect fees to allow oil and gas to flow through their pipelines. The demand for their service has been steadily increasing. But let’s say the economic slowdown reduces demand. Will that hurt their revenues?
Not really. You see, pipeline customers pay fixed reservation fees–in advance. Imagine if you had to pay a fixed fee in advance to cross bridges and tunnels–whether you use them or not. That’s why you can count on MLPs to perform well even during this economic rough patch. And there’s even more good news in store for MLPs.
We Need Billions of New Pipelines
Industry experts estimate that the U.S. needs $100 billion of new natural gas infrastructure over the next decade and billions more in crude oil and refined petroleum products.
The increasing demand for oil and gas has fueled the impressive performance of MLP stocks. Over the past 15 years, MLPs have outperformed the S&P 500 with a cumulative gain of 886% versus 549% for the broader market, and 18.3% versus 11.1% on a compound annualized basis.
So if you’re looking for capital appreciation, in addition to dividends, I urge you to consider master limited partnerships. On top of an 8.3% cash distribution, I expect the share price of my recommendation to climb 7% to 9% this year. Add the two together and you have the opportunity to gain 15% this year–that’s not bad considering the volatile nature of today’s market. And with the prospects for MLPs being as bright as they are, you can pretty much count on that kind of double-digit gain year after year.
Like some other sectors, MLPs are currently undervalued. You can get into my Top MLP recommendation now at a good price and look forward to excellent profits quite soon. Why am I convinced that investors are about to recognize the real value of this MLP and push up the price? Because right now people realize there is a very good chance Obama will be elected.
But what if McCain is elected?
The fact is Master Limited Partnerships will be a smart investment no matter who is elected. The price of oil has shocked Americans. John McCain has made a big point of getting more out of the oil and natural gas resources we have here in the U.S.(see also, “Get Rich from High Oil Prices“)
If McCain is elected there will be an even bigger push to increase drilling for oil and natural gas, and pipelines are the means of distribution. And Master Limited Partnerships are the way you can profit from this (see also,oil article). But the best profits begin now–before the election. Before word gets out about all the benefits and profits MLPs offer investors.
Richard Band’s Profitable Investing strategy helps investors grow their portfolios safely and securely, while taking advantage of solid growth opportunities. And the reason so many of his subscribers have stayed with him for so long is they’ve enjoyed both the protection and the profits he has guided them to for almost two decades. Sign up now for a 6 month Risk-Free trial to Profitable Investing, read Richard’s special report and consider the MLPs and other investments he is recommending. Now is the time to both protect your investments and position yourself for the gains you need. Start building up your portfolio now.
Also in this issue: