By Carla Pasternak Interest rates near zero and record-low U.S. Treasury yields make finding good income investments a bit harder these days. Don't get me wrong. It's still possible to find attractive yields, but you need to know where to look. Some of my best ideas for my High-Yield Investing and High-Yield International newsletters have come thanks to going off the beaten path and looking at asset classes overlooked by others. For example, I've locked in nice returns in the past by adding offbeat securities such as bank loan funds, trust preferred shares and master limited partnerships to my portfolios. And luckily for income investors, I'm still finding plenty of fertile hunting grounds out there. Here are five spots where you can still find double-digit yields.
To figure your tax equivalent yield, simply divide the bond fund yield by 1 minus your marginal tax rate. For instance, if the muni is yielding 7.2% and you are in the 28% tax bracket, your taxable equivalent yield would be 10% (7.2%/(1-0.28) = 10%). You can buy individual muni bonds, but funds are a better choice for most investors since they offer instant diversification.
One note of caution: most bonds have seen a sharp run-up lately. To make sure you don't overpay, check the net asset value of any fund and compare it to the share price before purchasing. These bonds generally trade near 90% of their face value, but some funds now trade above net asset value.