• »

Master Limited Partnerships

One of my top "bear killer" investment is a master limited partnership (MLP). I've recommended these offbeat securities many times in the past to Profitable Investing subscribers (with great success), but they've been especially timely recently because several MLPs dropped to bargain prices. As a result, you can earn lofty tax-deferred yields of 6%–7% while building a solid foundation for capital gains down the line.

Don't confuse MLPs with the disastrous, fee-laden real estate or oil-and-gas limited partner­ships of the 1980s. MLP units trade publicly on a stock exchange, just like ordinary shares. The disci­pline of a public market forces management to invest carefully and keep expenses under control.

Most often, MLPs nowadays are engaged in some aspect of the energy business. I'm particularly fond of the pipeline partnerships, since they generate large amounts of cash-flow in excess of reported earnings.

The result?

Next: The Tax Benefits on MLPs