In CLOs, default rates remain near record-making lows. economy seeing rising strength and inflation picking up steam, CLOs and BDCs are seeing strong tailwinds.įor both BDCs and CLOs, a hot economy is also great because it means that default rates will be running very low, especially if you are invested in the right companies. Both need you to be mindful of default risks.Both are exposed to middle-market businesses.It might offend some BDC fans to see BDCs and CLOs lumped together, but consider the similarity: "Business Development Companies" (or BDCs) and "Collateralized Loan Obligations" (or CLOs) are both economically sensitive investments and have been soaring along with the U.S. Economically sensitive stocks are set to have some of the best performance over 12 to 24 months. This means that the Fed is happy to let the economy run hot, despite higher inflation. These investments provide me with substantial income and ensure that I am hitting my income goals! BDCs And CLOsįederal Reserve Chairman Jerome Powell recently made it clear that interest rate hikes will likely not happen until 2023. Today, I want to share the love and explain and expound two areas in the market that I have invested 50% of my retirement. How much income do you need? Once you know that number, you can work your way to meet and exceed it! What do you need from your portfolio? Perhaps it's time to set an income-based goal for your portfolio, something to actively work towards. You have a limited supply of assets and need to allocate them wisely. If you're newly retired, five years may seem a long way away, but you are no longer receiving that paycheck every two weeks. Many are now realizing that risks abound in unexpected places.
Inflation spent most of the '90s, '00s, and '10s below 3%, causing inflation risk to fall off the radar for most investors. Inflation hasn't been a meaningful risk for retirees in 40 years. 2021 brings inflation risks and rising equity values while the cost of your nightly dinner is rising. You see, 20 have been formative years for many new retirees managing their own investments.Ģ020 brought the first big dip that many experienced while managing their portfolio. Perhaps it's time to interview yourself and time to make a plan. Have you recently sat down and made a plan for your future? It's a frequent favorite of interviewers to ask for your 5-year plan.
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