Talk Your Book: Income and Momentum

Key Takeaways

• Momentum rules avoid chasing past performance
• MFMO selects high‑quality stocks with strong price trends
• Preferred securities offer higher after‑tax yields than Treasuries
• Utilities and banks issue preferreds for regulatory capital benefits
• Private credit expands income options, but adds liquidity risk

Pulse Analysis

Momentum investing often suffers from the misconception that it merely chases recent winners. Motley Fool’s MFMO ETF counters this by applying a systematic, rules‑based filter that selects stocks exhibiting sustained price strength within a rigorously screened universe. This disciplined framework reduces behavioral bias, limits turnover, and provides a clear risk‑adjusted edge, especially valuable as equity markets oscillate between growth and value themes.

Preferred securities have resurfaced as a compelling income tool amid historically low Treasury yields. Issued primarily by utilities and financial institutions, these instruments combine bond‑like stability with equity‑like upside, delivering after‑tax yields that frequently outpace high‑yield bonds and comparable Treasury returns. Regulatory capital considerations further incentivize issuers, creating a steady pipeline of new preferreds that investors can access through ETFs such as EVPF, which benchmark against a diversified basket of institutional preferreds.

The rise of private credit adds another layer to the income landscape, offering higher yields but introducing liquidity constraints and credit‑risk nuances. As institutional investors allocate more capital to direct lending and non‑bank loan funds, the traditional fixed‑income hierarchy is shifting. Understanding how private credit interacts with preferred securities and momentum‑driven equity exposure enables portfolio builders to construct resilient, multi‑asset income streams that can weather rate hikes and market volatility.