PSF - JPI: Some Things To Like But Might Only Be A Short-Term Play

2024-06-06 13:56:37 ET

Summary

• Nuveen Preferred & Income Term Fund primarily invests in fixed-income securities, limiting its ability to protect against inflation.
• The JPI closed-end fund has a lower yield than many of its peers, making it less appealing for income-focused investors.
• Despite the lower yield, the fund has delivered strong performance, outperforming major fixed-income indices and appreciating by 16.53% since October 2023.
• The fund is overweight to the United States, but it still does a better job at having international diversification than most preferred stock CEFs.
• The fund is scheduled to liquidate at the end of August, so buying it discounted could provide the opportunity for near-term capital gains.

The Nuveen Preferred & Income Term Fund ( JPI ) is a closed-end fund, or CEF, that can be employed by income-focused investors who are seeking to maximize the income that they receive from their portfolios. As the name of the fund suggests, the Nuveen Preferred & Income Term Fund seeks to accomplish this task by investing primarily in fixed-income securities, which unfortunately means that its ability to protect against inflation is relatively limited. After all, as I have pointed out in numerous previous articles (such as this one ), fixed-income securities do not appreciate in price due to inflation because they have no connection to the net income or cash flow growth of the issuing company.

There are numerous reasons to expect that inflation will be a continual problem in the United States going forward, which is the reason why gold prices keep going up every time the market starts to think that the Federal Reserve will cut interest rates. After all, the data right now says that if the central bank genuinely wants to stop inflation, then it needs to start hiking interest rates and shock the market. In short, the Nuveen Preferred & Income Fund can provide us with a reasonable level of income, but it is not necessarily going to protect the purchasing power of our money over time....

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