'It Don't Worry Me!' Describes My High-Yield Strategy

Published Fri, 17 Mar 2017 14:46:36 -0400 on Seeking Alpha

In one of my all-time favorite movies, "Nashville," an endearingly goofy country singer wannabe played by Barbara Harris sings a show-stopping number called "It Don't Worry Me."
I think of that song a lot as I ponder the potential impact of higher interest rates on the prices of the high-yield securities in my portfolio.
Some Seeking Alpha writers have suggested that closed end funds, especially the high-yielding variety many of us prefer, are in for a hard time in the months ahead, as interest rates increase and/or stock prices begin to run out of steam, or worse.
The "Big" Question
For me the main issue is not that rising interest rates present risks to both the market value and the economic value (i.e. "present value") of securities with essentially "fixed" returns. This can include loans or bonds, the equity of companies and funds that own loans and bonds, and utilities and other equities that are bought primarily for their cash dividends and tend to "behave like bonds" in reacting to interest rate movements. Obviously these types of investments (which are mostly what I own) have risks, both to the stability of the income stream itself and to the market value of the assets themselves. Increases in rates or other events that may "spook the market," whether rationally or irrationally, can easily affect the prices of closed end funds like these, especially when you consider how volatile closed... Read more