This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

New BDC Fund Offers High Yields, Potentially High Risks

Obviously anyone buying a BDC believes that the underlying portfolio will more than recover the expense ratio and the dividends paid out which highlights the risk in owning a BDC. Depending on how the portfolio is structured, an adverse event could have a meaningful impact on performance.

Many BDCs are well diversified. For example ARCC's portfolio has 150 holdings and of course buying many BDCs in an ETF offers further diversification versus picking one or two BDCs and being wrong about the ones chosen.

It is important to realize the general risk that goes with investing in BDCs. Many BDCs yield 8% to 9% compared to 0% to 1% for things like money markets. That high of a yield is an indication of higher risk.

During the financial crisis ARCC dropped by 73% and ACAS declined by 98%. A repeat of 2008 is very unlikely but those declines help create some context for the potential risk of BDCs.

At the time of publication the author held no positions in any of the stocks mentioned.

This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.
2 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
ACAS $12.83 0.00%
ARC $6.18 0.00%
BIZD $16.27 0.00%
AAPL $112.12 0.00%
FB $93.24 0.00%


Chart of I:DJI
DOW 17,084.49 +33.74 0.20%
S&P 500 2,014.89 +15.91 0.80%
NASDAQ 4,830.47 +19.6820 0.41%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs