Alerian MLP ETF Cuts Expense Ratio To 4.85% [View article]
And that is where we have difference of opinion. I believe the overwhelming majority of those shareholders look no further than the ad's headlines of access to tax-efficient MLPs without K1s and a positive return since inception. They don't take the time or effort to understand that AMLP has cost original shareholders an extra 25% in taxes. You will also note that the fund has set aside nearly half a billion dollars for future tax payments. They are preying on your fear (or lack of knowledge) of K1s.
You have only owned AMLP for about a year. Therefore, you have only paid an additional 7% in taxes so far. Investors who bought on day one with the promise of getting access to "tax efficient MLPs" have now paid about 25% in additional taxes.
I obviously cannot convince you today. However, at some point, you will eventually realize you have paid far too much in taxes to get access to a tax-efficient vehicle. That breaking point will come at different times for different investors.
I suspect for many, the current 25% in extra taxes is too much (but most are probably not even aware of what it has cost them). What about when it reaches 50%? How about 100%? Yes, there will soon come a day when shareholders will have paid 100% of their original investment in extra taxes.
100% is not the limit though. If this fund is allowed to continue to operate, then the extra taxes can keep growing...200%, 500%, 1000% in EXTRA taxes for long term owners.
Alerian MLP ETF Cuts Expense Ratio To 4.85% [View article]
As a high roller trader you should be looking at MLPL as a potential trading vehicle in this space. Hopefully you realize that the NAVs of these funds drop the exact same amount as their distributions and that any net profit is theoretically the result of market forces.
Boost Your Portfolio Returns With MLP Funds [View article]
They are not required to do anything with the money lent to them in exchange for the notes. However, most (or all) use the money to hedge their positions. They do so by buying the components of the underlying index and/or swaps on that index.
Boost Your Portfolio Returns With MLP Funds [View article]
It has the highest current yield by far, and for investors who care about nothing but yield, it should be a no-brainer.
However, leverage is a double-edged sword. The next time this sector takes a double-digit plunge, MLPL's price will take a severe beating.
As with all leveraged funds, MLPL is better suited as a trading vehicle. As an absolute minimum, determine your exit criteria before buying, and be disciplined about following that criteria.
Boost Your Portfolio Returns With MLP Funds [View article]
I just noticed that your risk-reward plane graph indicates that AMLP is the only MLP vehicle who's risk-reward is below that of the S&P.
Even if you assume the efficient frontier is a straight line from SPY down to the (0,0) coordinates (instead of the standard bowing effect from diversification), AMLP is the only one below the line.
Boost Your Portfolio Returns With MLP Funds [View article]
It should be noted that the higher current yield of AMLP is artifical. It has produced roughly the same quarterly payouts since its inception as MLPI. However, MLPI's denominator (price) has increased 28% more than AMLP. Therefore, AMLP's current yield has been artificially enhanced by its lower NAV.
Alerian MLP ETF Cuts Expense Ratio To 4.85% [View article]
I'm not a tax advisor and I'm not sure I fully understand what you are asking, but if you are saying that you will never have to pay taxes on the distributions you receive, then I don't believe that is correct.
Consult your tax advisor.
If the distributions are labeled "return of capital" then it is my understanding your taxes on those distributions are deferred until time of sale or until your cost basis goes to zero.
In the meantime, every "return of capital" distribution lowers your cost basis and increases your tax liability upon the sale of your shares.
If you are asking whether that return of capital is then taxed as ordinary income or capital gains, I would again direct you to your tax advisor. However, according to investinganswers.com, it appears it might be taxed as ordinary income: http://bit.ly/HBzc0y
An excerpt from that link: "There are two significant attributes of returns of capital. First are the future tax effects. If, in our example above, you sell your Company XYZ investment after year one, when the basis has fallen to $5, the taxable amount associated with the sale is based on the difference between $5 and the sale price. So even though you may have paid $10 for the investment, you calculate the taxable amount as if you paid only $5. Any gain on the sale is taxed at your ordinary income tax rate. This can significantly increase your tax bill, but some investors find the cash inflow from the return of capital worth it."
Alerian MLP ETF Cuts Expense Ratio To 4.85% [View article]
When AMLP first came out, I recommended going long MLPI and shorting AMLP. They "track" the same Alerian Infrastructure Index, so the difference boils down to expenses. I typically do not sell shares short, so I do not know what additional costs are associated with borrowing shares of AMLP to short.
The performance of this pairs trade has been +19.9%/yr for MLPI minus 13.3% for AMLP, for a net of about 6.6% annualized. I have written this up for a Forbes Special Report that should be published any day now.
If you ever wanted to have the power to levy taxes, then this trade essentially lets you be the tax man by capturing the deferred tax liability of AMLP.
Please be aware this is neither a guaranteed nor a risk-free trade. During periods of MLP price declines, tax credits are generated, which reduces the liabilities. There is also a slight credit risk with owning MLPI.
Alerian MLP ETF Cuts Expense Ratio To 4.85% [View article]
Please keep in mind that the 4% reported (> 7% actual) expenses for deferred tax liability is only for the fund itself. Each individual shareholder still has to pay their own taxes on all capital appreciation and on all distributions when their shares are sold. This is a double taxation vehicle.
Alerian MLP ETF Cuts Expense Ratio To 4.85% [View article]
Thanks for your support. However, AMJ and AMLP track different indexes. There is another ETN, MLPI that does track the same index as AMLP though, and the performance differences between the two are glaring.
Alerian MLP ETF Cuts Expense Ratio To 4.85% [View article]
Yes, for anyone who's position is small enough that a 28% underperformance does not translate to enough dollars to matter or to hire a CPA, then AMLP could possibly be an efficient solution.
Alerian MLP ETF Cuts Expense Ratio To 4.85% [View article]
You have only owned AMLP for about a year. Therefore, you have only paid an additional 7% in taxes so far. Investors who bought on day one with the promise of getting access to "tax efficient MLPs" have now paid about 25% in additional taxes.
I obviously cannot convince you today. However, at some point, you will eventually realize you have paid far too much in taxes to get access to a tax-efficient vehicle. That breaking point will come at different times for different investors.
I suspect for many, the current 25% in extra taxes is too much (but most are probably not even aware of what it has cost them). What about when it reaches 50%? How about 100%? Yes, there will soon come a day when shareholders will have paid 100% of their original investment in extra taxes.
100% is not the limit though. If this fund is allowed to continue to operate, then the extra taxes can keep growing...200%, 500%, 1000% in EXTRA taxes for long term owners.
Alerian MLP ETF Cuts Expense Ratio To 4.85% [View article]
Boost Your Portfolio Returns With MLP Funds [View article]
Twice In A Year: AMLP Expense Ratio Surges To 4.86% [View article]
However, an investment in MLPI, which tracks the SAME EXACT index, had a total return of 28.2%.
The tax drag of AMLP was > 10% in less than 1 year.
"This result is not mighta, coulda, woulda. It is FACT."
Same index - different results.
MLPs are designed to be tax efficient - AMLP undoes it.
Boost Your Portfolio Returns With MLP Funds [View article]
However, leverage is a double-edged sword. The next time this sector takes a double-digit plunge, MLPL's price will take a severe beating.
As with all leveraged funds, MLPL is better suited as a trading vehicle. As an absolute minimum, determine your exit criteria before buying, and be disciplined about following that criteria.
Boost Your Portfolio Returns With MLP Funds [View article]
Even if you assume the efficient frontier is a straight line from SPY down to the (0,0) coordinates (instead of the standard bowing effect from diversification), AMLP is the only one below the line.
Twice In A Year: AMLP Expense Ratio Surges To 4.86% [View article]
Boost Your Portfolio Returns With MLP Funds [View article]
Alerian MLP ETF Cuts Expense Ratio To 4.85% [View article]
Consult your tax advisor.
If the distributions are labeled "return of capital" then it is my understanding your taxes on those distributions are deferred until time of sale or until your cost basis goes to zero.
In the meantime, every "return of capital" distribution lowers your cost basis and increases your tax liability upon the sale of your shares.
If you are asking whether that return of capital is then taxed as ordinary income or capital gains, I would again direct you to your tax advisor. However, according to investinganswers.com, it appears it might be taxed as ordinary income:
http://bit.ly/HBzc0y
An excerpt from that link:
"There are two significant attributes of returns of capital. First are the future tax effects. If, in our example above, you sell your Company XYZ investment after year one, when the basis has fallen to $5, the taxable amount associated with the sale is based on the difference between $5 and the sale price. So even though you may have paid $10 for the investment, you calculate the taxable amount as if you paid only $5. Any gain on the sale is taxed at your ordinary income tax rate. This can significantly increase your tax bill, but some investors find the cash inflow from the return of capital worth it."
Alerian MLP ETF Cuts Expense Ratio To 4.85% [View article]
The performance of this pairs trade has been +19.9%/yr for MLPI minus 13.3% for AMLP, for a net of about 6.6% annualized. I have written this up for a Forbes Special Report that should be published any day now.
If you ever wanted to have the power to levy taxes, then this trade essentially lets you be the tax man by capturing the deferred tax liability of AMLP.
Please be aware this is neither a guaranteed nor a risk-free trade. During periods of MLP price declines, tax credits are generated, which reduces the liabilities. There is also a slight credit risk with owning MLPI.
Alerian MLP ETF Cuts Expense Ratio To 4.85% [View article]
Alerian MLP ETF Cuts Expense Ratio To 4.85% [View article]
Alerian MLP ETF Cuts Expense Ratio To 4.85% [View article]
Why would anyone want to own something they are critical of? Wouldn't that person sell it?
I think your logic may be a little backward here. If you reverse what you are saying, then it all makes sense:
I am critical of AMLP. Therefore I do not own it (and if I did I would sell it).
Alerian MLP ETF Cuts Expense Ratio To 4.85% [View article]
Alerian MLP ETF Cuts Expense Ratio To 4.85% [View article]