2023-07-29 06:18:00 ET
Bull markets generally lead to extreme investor enthusiasm. With some Wall Street commentators saying we are now back in bull territory, long-term investors should probably take a step back and temper their excitement. Constant vigilance is a much better way to approach investing. And right now, dividend investors eyeing AGNC Investment's (NASDAQ: AGNC) massive 13.8% dividend yield should tread with caution. It might not be the bargain you hope it is.
AGNC is a mortgage real estate investment trust (REIT). This is vastly different from property-owning REITs, which are fairly simple to understand using kitchen table finance. Basically, you buy a property and rent it out. Mortgage REITs buy mortgages that have been cobbled together into bond-like securities, often called collateralized mortgage obligations (CMO). CMOs are usually backed by a lot of individual mortgage loans, with each loan having its own risk/reward profile. To complicate things, mortgage REITs generally use leverage, often backed by the value of the CMOs it owns, in an attempt to enhance returns.
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A Bull Market Could Be Here: AGNC Investment Isn't the Bargain You Think