Despite early losses trading credit spreads this year the EAF portfolio is actually riding rather high at the moment. Early successes in both Lending Club and Betterment have lead to good returns and increased diversification across the portfolio. Never content with the amount of knowledge I have as an amateur investor I continued research into alternative investment options until I happened upon Master Limited Partnerships or MLPs. I've heard the term before but hadn't looked into them until recently and today I bought my first units.
What is an MLP? Broadly put it is a stake of owning a company. More specifically only certain types of business can issue MLPs. Natural resources such as oil and natural gas are the basis for many MLPs including the one I invested in. Being a partnership means that you purchase units (in contrast to shares) and they carry certain tax implications. Due to the complexity of the tax paperwork and the tax benefits of an MLP it was widely accepted in my research that MLPs need to be held in taxable accounts which works well for what I wanted. Many are publicly traded on the stock market so I am able to access then through my normal broker. The MLP I purchased is Plains All American Pipelines LP [PAA].
Besides the tax benefits (which I admit I don't fully understand yet) these investments also carry other benefits. They move independently of the stock market. This is one of the big reasons I decided to purchase some units. I'm a huge fan of diversification, including diversifying outside of the general stock market. The price of this MLP in particular appears to track with the general price of energy as well. Now that energy prices in the US are low, the unit price is also low. When energy becomes more expensive (like gas for instance), it will go up. It is a natural hedge against rising energy costs. The main attraction to these partnerships is their dividends, my MLP in particular is currently yielding over 6%.
I purchased a nice round 100 units of [PAA] today as my first foray with MLPs. I will track and report on it to see how we do in the future. This is a long term buy and hold play for dividends, diversification, and energy cost hedging. I'm excited to see how it performs alongside my other investments, specifically Betterment and Lending Club.
MLP - On the Stock Market but Not Stock
What is an MLP? Broadly put it is a stake of owning a company. More specifically only certain types of business can issue MLPs. Natural resources such as oil and natural gas are the basis for many MLPs including the one I invested in. Being a partnership means that you purchase units (in contrast to shares) and they carry certain tax implications. Due to the complexity of the tax paperwork and the tax benefits of an MLP it was widely accepted in my research that MLPs need to be held in taxable accounts which works well for what I wanted. Many are publicly traded on the stock market so I am able to access then through my normal broker. The MLP I purchased is Plains All American Pipelines LP [PAA].
Besides the tax benefits (which I admit I don't fully understand yet) these investments also carry other benefits. They move independently of the stock market. This is one of the big reasons I decided to purchase some units. I'm a huge fan of diversification, including diversifying outside of the general stock market. The price of this MLP in particular appears to track with the general price of energy as well. Now that energy prices in the US are low, the unit price is also low. When energy becomes more expensive (like gas for instance), it will go up. It is a natural hedge against rising energy costs. The main attraction to these partnerships is their dividends, my MLP in particular is currently yielding over 6%.
I purchased a nice round 100 units of [PAA] today as my first foray with MLPs. I will track and report on it to see how we do in the future. This is a long term buy and hold play for dividends, diversification, and energy cost hedging. I'm excited to see how it performs alongside my other investments, specifically Betterment and Lending Club.
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