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JPMorgan Alerian: An ETN for MLPs

06/26/2018 5:00 am EST

Focus: ENERGY

Robert Carlson

Editor, Retirement Watch

Traditional income investments still offer very low yields, and they’re losing value because interest rates are rising, cautions income expert Bob Carlson, editor of Retirement Watch.

That’s why in the Retirement Paycheck portfolio we consider an expanded range of income investments, including master limited partnerships (MLPs), preferred stock, high-yielding stocks, closed-end funds and more.

We also don’t buy and hold. We manage risk by adding an investment when it is down or reasonably valued, and sell those that have become too popular or highly valued.

Master limited partnerships (MLPs)continue to recover, and we own them through JPMorgan Alerian MLP ETN (AMJ). This exchange-traded note (ETN) pays investors the total return of an index of the 50 largest MLPs and also makes periodic interest payments based on the yield of the index.

MLPs had a tough time during the energy bear market of 2014-2016. They began to recover with energy prices, but tumbled again in 2017 and early 2018 as many MLPs reduced distributions and took other steps to adapt to the new business environment.

But they’re finally moving higher. AMJ is up 2.71% in the last four weeks and 5.11% in the last three months. It’s down 0.30% for the year to date and still is down 3.16% over 12 months. The yield is 5.16%. MLPs should do well, as long as the economy is growing.

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