8% Or Higher Dividends: Domestic Equity CEFs Vs. Private Equity

Investing in bonds for income is very dangerous today because rate spikes can dramatically reduce the value of your investments, and inflation can dramatically destroy the purchasing power of your interest payments. Consider the iShares Barclays 20+ Year Treasury Bond ETF (TLT).TLT has an average effective duration of 15.25, which means that a 1% increase in interest rates would reduce the value of TLT by 15%. This is rough! This is not safety. Income investors in 2011 faces the dilemma of a debt bubble. Interest rates are at record lows, and short-term treasuries are expected to earn negative real returns. Investors seeking yield have bid up the prices of junk bonds and bid down their yields. This can be witnessed in the returns of the high yield debt (junk bond) exchange-traded funds (ETFs), which trade at dividend yields near 8%. Domestic equity companies with dividends competitive with junk bond interest... Read more