Jeffrey Gundlach to Investors: Buy Mortgage REITs, Short Utilities

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Part 11
Jeffrey Gundlach to Investors: Buy Mortgage REITs, Short Utilities PART 11 OF 16

Why Investors Should Consider Mortgage-Backed Securities

Investors need alternatives outside the stock market

In a webcast in April, Jeffrey Gundlach suggested that mortgage-backed securities are what investors should be looking at right now. Gundlach advises investors to stay away from corporate bonds (LQD) (AGG) (BND) and high-yield (HYG) and junk (JNK) bonds. Instead, he said that investors should consider buying mortgage-backed securities.

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Gundlach sees yields of about 10%–12% in the CMBS market

Gundlach sees opportunities for yields of about 10%–12% in the collateralized mortgage-backed securities market within some funds. The iShares MBS ETF (MBB), the Vanguard Mortgage-Backed Securities ETF (VMBS), and the iShares CMBS ETF (CMBS) provide exposure to investment grade mortgage-backed securities.

Mortgage-backed securities aren’t sensitive to oil prices

Most of the corporate bonds and high-yield debt universe aren’t sensitive to oil price fluctuations. Well, mortgage-backed securities (REM) aren’t. It’s understood that the idea of investing in mortgage-backed securities might send shudders through many investors. The financial crisis in 2007–2009 saw a major low credit quality mortgage-backed securities bubble burst. This took down everything else with it.


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