"Income Solutions" for a Retirement Portfolio

08/05/2016 9:00 am EST

Focus: FUNDS

Robert Carlson

Editor, Retirement Watch

Our Retirement Paycheck portfolio is our strategy for earning above-average income from those who primarily want income from their portfolios. We also have the potential to generate some capital gains over time, explains Bob Carlson, editor of Retirement Watch.

To earn this above-average income we have to accept more volatility than a traditional portfolio of safe income investments, such as money markets, CDs and short-term bonds.

One closed-end fund we own is DoubleLine Income Solutions (DSL), which is co-managed by a team of managers from three DoubleLine funds.

Each co-manager has special expertise in different sectors of the fixed-income market. The fund is able to invest in almost any income investment in the global markets.

It has a primary goal of generating a high level of current income and a secondary goal of earning capital gains.

DoubleLine’s fixed-income funds have done well, so it makes sense to own this fund, which is basically “the best of DoubleLine.”

Almost 70% of the fund is invested in different types of corporate bonds, including almost 4% in bank loans. Most of the rest of the fund is in residential mortgage securities, commercial mortgage securities and asset-backed securities.

Almost 45% of the fund is in emerging market securities, showing DoubleLine’s strong belief in the potential for emerging market bonds over the next few years.

The rest of the securities primarily are issued in the United States and Europe. About 18% of the fund is in high yield corporate bonds from the different regions.

The fund’s yield recently hit 9.64%. Unlike many closed-end funds, the distributions are paid only from income. The fund has about a 27% leverage ratio.

The fund sells at a discount to net asset value, which increased a little in the last month to 5.80%. It returned 3.40% in the last four weeks and 22.47% so far in 2016.

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By Bob Carlson, Editor of Retirement Watch

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