The Best Investment You've Never Heard Of

Pipeline master limited partnerships have marvelous ten-year returns and often yield 6% or higher. What are you waiting for?

We lionize a mutual fund that returns 20% during a bear market. Or we assume that anything earning such fabulous returns must be a fraud or caught in a bubble. Now consider a whole class of investments, many of which have returned double digits annualized during the stock-market quagmire of the past decade. More remarkable: Few of us are aware of this phenomenon called pipeline master limited partnerships.

Pipeline MLPs own and operate oil-and-gas pipelines and related energy infrastructure, such as gas-storage facilities. Most of their operations are in Texas, the South, the Rocky Mountain region and the Midwest. You buy and sell MLP units just as you would shares of stock. Because they are service and transportation businesses, pipeline operators aren’t jerked around by energy prices -- they have a limited stake in the price of oil and gas or refined products, and much more in the volume of the products they transport. There are other MLPs in energy that engage in riskier activity, such as exploration, production, and owning and leasing drilling rigs and platforms.

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Jeffrey R. Kosnett
Senior Editor, Kiplinger's Personal Finance
Kosnett is the editor of Kiplinger's Investing for Income and writes the "Cash in Hand" column for Kiplinger's Personal Finance. He is an income-investing expert who covers bonds, real estate investment trusts, oil and gas income deals, dividend stocks and anything else that pays interest and dividends. He joined Kiplinger in 1981 after six years in newspapers, including the Baltimore Sun. He is a 1976 journalism graduate from the Medill School at Northwestern University and completed an executive program at the Carnegie-Mellon University business school in 1978.