John Wasik

CHICAGO (Reuters) – In a frantic search for yields, investors often turn toward relatively unknown products. Business Development Companies (BDCs) are one of latest vehicles to grab investor attention – and money.

BDCs are companies that lend to young, thinly traded and often distressed companies that have credit ratings in the “junk” status. They are as close to a private equity enterprise as you’re going to get in a public company. Yet their high yields come at a price in terms of elevated risk that should not be underestimated, and investors must proceed with caution.

Like Real Estate Investment Trusts (REITs), BDCs must pass through at least 90 percent of their profit to shareholders. Most of their borrowers carry the lowest-possible credit ratings such as BBB-, or are not rated at all. They hold a variety of companies in their portfolios, so some are more diversified than others.

As high-yield vehicles, BDCs have been emerging at a relatively rapid clip in recent years. There were just four of them nine years ago. Now, there are nearly 30, with a total market capitalization of $26 billion, according to Financial Advisor, a trade magazine. That’s peanuts compared with megabanks like JPM Morgan Chase & Co or Bank of America Corp, but they are a growing force in corporate finance.

While regulated, BDCs occupy a useful niche in helping companies grow. Since they can borrow at record-low rates and make money on the spread – the above-market rates they charge less credit-worthy borrowers – BDCs are in a sweet spot now as the economy continues to rebound. They can provide financing to a wide range of companies typically eschewed by mainstream banks. Consider them sub-prime lenders to small- to mid-size companies.

CHICAGO, May 17 (Reuters) – In a frantic search for yields,
investors often turn toward relatively unknown products.
Business Development Companies (BDCs) are one of latest vehicles
to grab investor attention – and money.

BDCs are companies that lend to young, thinly traded and
often distressed companies that have credit ratings in the
“junk” status. They are as close to a private equity enterprise
as you’re going to get in a public company. Yet their high
yields come at a price in terms of elevated risk that should not
be underestimated, and investors must proceed with caution.

Like Real Estate Investment Trusts (REITs), BDCs must pass
through at least 90 percent of their profit to shareholders.
Most of their borrowers carry the lowest-possible credit ratings
such as BBB-, or are not rated at all. They hold a variety of
companies in their portfolios, so some are more diversified than
others.

CHICAGO (Reuters) – Is the Dow’s movement above 15,000 or the record close of the S&P 500 Index last week a buy signal? They may not mean anything, but most market watchers believe the rise is talismanic.

Despite the lure of recent market gains, there’s often no pattern to investment results. To avoid seeing patterns where there may be none – and acting irrationally – we often need to short-circuit our instincts and think counter-intuitively.

A go-slow approach that avoids trading on market timing can often avert losses. Here are some behavioral biases and ways to prevent bad decisions:

CHICAGO, May 15 (Reuters) – Is the Dow’s movement above
15,000 or the record close of the S&P 500 Index last week a buy
signal? They may not mean anything, but most market watchers
believe the rise is talismanic.

Despite the lure of recent market gains, there’s often no
pattern to investment results. To avoid seeing patterns where
there may be none – and acting irrationally – we often need to
short-circuit our instincts and think counter-intuitively.

A go-slow approach that avoids trading on market timing can
often avert losses. Here are some behavioral biases and ways to
prevent bad decisions:

CHICAGO (Reuters) – If you’re willing to take on more risk, it’s a good time to move beyond corporate and government bonds in the incredibly challenging search for yield.

While attention has been on the record-setting stock market – the Dow Jones Industrial Average closed above the symbolic 15,000 on Tuesday and kept climbing – bond yields have been heading south. The benchmark 10-year U.S. Treasury is yielding around 1.8 percent after hitting 2 percent in early March.

An “in-between” portfolio that focuses on yield from non-traditional sources while owning dividend-rich stocks is one approach to find income. This strategy is based on the reality that bond yields probably won’t rise much in the next year or so. You’ll have to venture into alternative investments if you want to boost your income stream.

CHICAGO, May 10 (Reuters) – If you’re willing to take on
more risk, it’s a good time to move beyond corporate and
government bonds in the incredibly challenging search for yield.

While attention has been on the record-setting stock market
- the Dow Jones Industrial Average closed above the symbolic
15,000 on Tuesday and kept climbing – bond yields have been
heading south. The benchmark 10-year U.S. Treasury is yielding
around 1.8 percent after hitting 2 percent in early March.

An “in-between” portfolio that focuses on yield from
non-traditional sources while owning dividend-rich stocks is one
approach to find income. This strategy is based on the reality
that bond yields probably won’t rise much in the next year or
so. You’ll have to venture into alternative investments if you
want to boost your income stream.

CHICAGO (Reuters) – A torrent of money flowing into target-date funds suggests many retirement investors may be ignoring the risks of this key category.

These funds now represent the second-most-popular allocation after U.S. large-stock funds within defined-contribution plans like 401(k) accounts, according to pension consultant Callan Associates. Target-date assets have climbed above $500 billion, attracting $16 billion in the first two months of 2013 alone, according to Strategic Insight.

Target-date funds combine several mutual funds within one package and are managed so that they move to less risky postures as their shareholders move closer to retirement. That movement – usually from stocks to bonds – is called the fund’s “glide path.” The funds take aim at specific future dates, and investors are expected to buy the fund that matches their own retirement date.

CHICAGO, May 8 (Reuters) – A torrent of money flowing into
target-date funds suggests many retirement investors may be
ignoring the risks of this key category.

These funds now represent the second-most-popular allocation
after U.S. large-stock funds within defined-contribution plans
like 401(k) accounts, according to pension consultant Callan
Associates. Target-date assets have climbed above $500 billion,
attracting $16 billion in the first two months of 2013 alone,
according to Strategic Insight.

Target-date funds combine several mutual funds within one
package and are managed so that they move to less risky postures
as their shareholders move closer to retirement. That movement -
usually from stocks to bonds – is called the fund’s “glide
path.” The funds take aim at specific future dates, and
investors are expected to buy the fund that matches their own
retirement date.

CHICAGO, May 3 (Reuters) – With consumer stocks blazing this
year, it makes sense for investors to focus on retailers as the
U.S. economy continues an inchworm-like recovery. But retail is
a fickle business. And trying to guess which companies will
survive over the long-term is a dangerous game.

Instead of buying individual stocks, you’d be better off
owning an exchange-traded fund of retailers benefiting from a
revival of consumer spending, employment, home wealth and
economic growth. Two of the top three sectors in the economy
have been consumer discretionary products and staples, which
include the stock of both manufacturers and retailers. The
sectors have gained 14 percent and 17 percent year to date,
respectively, through May 1, according to Standard & Poor’s. The
other top sector was healthcare.

There are four exchange-traded funds that focus on the
retail group. I like two of them, for different reasons.

CHICAGO, April 29 (Reuters) – Whether you need to invest a
tax refund or simply want to see if you’re on track with your
investments, spring is a great time to get out the broom.

I needed to make a large contribution to my 401(k) to offset
some taxes recently, so I took the opportunity to see that my
portfolio is meeting my objectives.

In my case, I needed to do some rebalancing and check
returns of the funds I owned against benchmarks. Then I checked
to see if my funds tracked my long-term investment policy.