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Strategies & Market Trends : Dividend investing for retirement -- Ignore unavailable to you. Want to Upgrade?

To: Elroy who wrote (24120)	12/26/2015 8:57:17 PM
From: JimisJim	Read Replies (2) \| Respond to of 34328

I notice in the prospectus for BDCL that this phrase pops up a LOT: "less financing costs and investor fees." and they achieve their 2X leverage by buying lots and lots of sr. unsecured debt -- part of the fees they deduct from what they will pay you is the cost of them borrowing money to buy the debt to achieve the 2X leverage -- they also deal options and derivatives to achieve that 2X, but in BDCL's case, it appears it's mostly about buying gobs of debt on which the costs will rise as interest rates rise... vs. buying actual BDC shares that can actually do very well in rising interest rate environments because MOST of them charge a variable interest rate while their own borrowing costs are fixed (and currently about as low as they can be)...

To: Elroy who wrote (24120)	12/26/2015 9:08:56 PM
From: E_K_S	Read Replies (1) \| Respond to of 34328

Do you mean that if the BDCs in its portfolio decline, then it would need to sell them to maintain the covenant on the borrowings it made to get to 2x leverage I only know about the CEF funds I follow. Not sure about the BDC CEF funds but w/ the MLP funds many use leverage to 'juice' their return but can result in forced sales (by the CEF fund) if their leverage ratios exceed their fund mandate levels. There were several MLP CEF funds that were forced to sell shares to bring their fund back into compliance. The leverage used can be as much as 30% so if/when there are forced sales, it can be an amplified downside event as selling begets selling. The CEF NAV were at all time lows too and it got pretty ugly in all the MLP stocks I watch. Those 2x & 3x ETF funds are even worse and for me, not anything i would ever want to hold and/or trade. When I buy CEF funds, I always look at the leverage they use and try to find those with little to none. One MLP fund I own has one of the lowest leverage amounts and that still 17%. Vanguard Funds tend to use little to no leverage, so anybody looking for a BDC fund, I would check out Vanguard first. For the buy and hold investor, just play it safe and buy one of the Vanguard funds. It's just not worth the risk especially for an IRA and/or ROTH account. That's the way I plan to invest in BDC's. Good investing EKS