Getting quality investment information is often like trying to tap dance on a minefield – difficult and dangerous!
Between biased opinions, conflicts of interest, inadequate research and just plain old nonsense, it’s sometimes hard to know what to believe.
Which is why when I’m looking for a dose of common sense and straight talk, one of the guys I turn to is Bill Gross.
Gross is the legendary figure who, in 1971, co-founded the Pacific Investment Management Company – better known as PIMCO.
Back then, the firm began life with $12 million in assets. Today, it handles around $1.3 trillion worth of investments. Gross himself manages $250 billion for the PIMCO Total Return Fund (PTTRX), which specializes in bond investments. He’s held the position since 1987 and boasts a superb 22-2 record in terms of positive versus negative years.
No wonder he’s known as the “Bond King.”
I was interested to read Gross’ March bulletin to investors – not least because he starts it with one of my own favorite habits: making a sports analogy!
Go for Substance Over Style
Gross notes something that you often hear in sports: Defense wins championships.
You can have the most impressive, entertaining, high-octane attack imaginable, but all it takes is one bad day at the office and you’re doomed. By contrast, defense might not be as flashy, but it’s the foundation for success. It requires more discipline and consistency, and if you get it right, you’re in great shape.
The same logic applies to investing, says Gross. He has a point. While you won’t get a shiny medal for your achievements, playing good defense will not only protect your portfolio, but can be the springboard for dependable profits.
And Gross just made it easier for investors to do so, too, by allowing income-seekers to tap into his hugely successful PIMCO Total Return Fund via the exchange-traded fund (ETF) market…
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Last week, PIMCO branched out into the world of ETFs when it launched the PIMCO Total Return ETF (NYSE: TRXT). Like the mutual fund of the same name, TRXT is a bond fund that invests in fixed-income investments and investment-grade debt.
As an ETF, it trades just like a regular stock, so you have more buying and selling flexibility. And it fits Gross’ defensive mantra, with the goal of providing safe, consistent, reliable income.
Which is what many investors crave in this zero-yield climate.
In his monthly PIMCO bulletin, Gross says we’re suffering from “financial repression,” due to 0% interest rates from the Federal Reserve since December 2008, coupled with massive quantitative easing. As a result, it forms the basis for his defensive strategy:
“An instant replay of these past few decades would have shown that accelerating asset prices weren’t due to any particular wisdom on the part of academia or the investment community, but an offensively minded Federal Reserve and their global counterparts who were printing money, lowering yields and bringing forward a false sense of monetary wealth.
“Low yields, instead of fostering capital gains for investors, begin to reduce household incomes, lower corporate profit margins and wreak havoc on historical business models connected to banking, money market funds and the pension industry. The offensively oriented investment world that we have grown so used to over the past three decades is being stonewalled by a zero-bound goal line stand. Investment defense is coming of age.”
Based on the adage that the best form of attack is defense, the creation of PIMCO’s new ETF proves that the company aims to do just that. It’s a way of offering the safe, reliable income from PIMCO’s Total Return mutual fund to ETF investors, too.