Don’t Sacrifice Safety for Income: Annaly Capital Management, Inc. (NLY), American Capital Agency Corp. (AGNC) and More

Page 1 of 2

Conservative investors are in a very uncomfortable position right now, as their regular sources of portfolio income have seen their payouts slashed in recent years.

Yet before you go ramping up the risk level of your portfolio just to make ends meet, you really need to consider whether doing so won’t just trade one problem for a potentially much larger one that could put your entire life savings at risk.

Annaly Capital Management, Inc. (NYSE:NLY)

The income dilemma
The huge problem that many conservative investors face is that the investments they’ve traditionally relied on to provide the income they need have essentially dried up. Even prudent investors who wisely prepared bond and CD ladders to take advantage of higher interest rates in the past have steadily seen their income fall, as old CDs yielding 5% or 6% get replaced with new ones that pay only 1% or 2%.

In response, those desperate for income have piled into asset classes that involve very different types of risk. Lower-grade corporate and municipal bonds offer higher payouts than other bonds, but they also carry with them much weaker credit ratings and significantly greater chances of losses from default. Many investors have also started to give up on bonds, moving money into the stock market.

In particular, some highly specialized segments of the market have attracted a lot of attention:

1). In the natural resources space, master limited partnerships have drawn interest because of their sizable distribution yields and favorable tax characteristics. Yet ALPS Alerian MLP ETF and the MLPs that make up the fund’s holdings have returns that are highly dependent on conditions in the oil and gas industry, leaving many investors dangerously concentrated in that area.

2). Real estate investment trusts offer some of the highest yields in the market, and floods of money have poured into REITs, especially those specializing in mortgage-backed securities. Annaly Capital Management, Inc. (NLY)American Capital Agency Corp. (NASDAQ:AGNC) , and other major players in the mortgage REIT market have seen their market capitalizations soar as successive secondary offerings and high levels of leverage have greatly boosted the size of their balance sheets. Yet even having taken steps to hedge some interest rate risk through the use of derivatives, mortgage REITs are still vulnerable to any adverse conditions that threaten their ability to gain access to leverage.

There’s nothing inherently bad about any of these investments. The problem, though, is that they’re a far cry from the bonds and CDs that their new investors are used to, and without a complete understanding of what they’ve gotten themselves into, conservative investors won’t know what to expect from them or the potential problems that may arise with them.

Page 1 of 2

Dividend Stock Alert - Billionaire Robbins' Top Dividend Idea With 70% Upside Potential

Get Paid 3.5% Per Year While Waiting For The Stock Appreciate 70%

Larry Robbins' Glenview Capital Opportunity Fund returned 101.7% in 2013 and Robbins personally made $750 million. The same fund returned 25.3% in 2014. In this FREE REPORT we will share Robbins' top dividend idea that yields 3.5% and has been increasing its dividends for 39 consecutive years. Robbins thinks the stock has the potential to appreciate 70%.

This is a FREE report from Insider Monkey. Credit Card is NOT required.
Click here to Read Comments
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 74 percentage points in 2.5 years. Our beta is only 1.2 (download a FREE newsletter and see the details inside)

Lists

Best Selling Magazines in the World

Shortest People in History

The Most Celebrated Holidays in the World

Most Expensive Handbag Brands in the World

Top Selling Comic Book Issues of this Century

The Most Powerful Women in Politics

Best Paid DJs

Most Rebellious Female Artists

Best Paid TV Actresses of 2014

Best Paid Actors of 2014

Most Expensive Horses in the World

Tallest People Ever

Most Encouraging Feminist Celebrities

Best Paid Supermodels of 2014

Top 10 Suburbs for Retirement in 2015

10 Wealthiest Cities in America

Top 10 TED Talks for Entrepreneurs

Best TED Talks on Education

25 Most Dangerous Places to Live in America

Top 10 Ski Resorts in the United States – 2014 List

Top 10 Most Remote Places in the World

Most Visited Museums in the United States

Wealthiest Photographers in the World

Most Famous Gay Athletes

The World’s Most Famous Circuses

Best Hair Stylists

Most Popular NASCAR Drivers

The Best Romance Movies of all Time

The Most Wanted Drug Lords

The Oldest Money Managers

The Greatest Directors in the World

Largest Animals in the World

World’s Most Expensive Desserts

Best Selling Comic Books of All Time

A-list Actors who Sabotaged Their Career

Rappers With a College Degree

The Best Jazz Albums of all Time

The Most Influential Jazz Musicians

The World’s Most Famous Photographers

The Best Oscar-Winning Songs

Most Influential Choreographers Ever

Most Expensive Department Stores in the World

The Most Expensive Stolen Paintings in the World

The World’s Most Expensive Teas

Top Oscar Record Holders

The Most Expensive Flowers in the World

Countries With a Booming Film Industry

Most Expensive Cupcakes in the World

Uncommon European Escapes

The Most Stolen Artists in History

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 129% in 2.5 years!! Wondering How?

Download a complete edition of our newsletter for free!