Learning From the Pros: How PIMCO Taught Me That Leverage Isn’t the Enemy
One of the most common comments I see on the channel is simple:
“Margin is always bad. Don’t use it.”
I understand why people feel this way. Leverage can absolutely be dangerous if used recklessly. But the idea that leverage is always bad ignores decades of real-world evidence from some of the most respected income managers in the world.
And honestly, this realization was a major turning point in my own investing journey.
The Moment My Perspective Changed
When I first discovered the funds from PIMCO, it flipped a switch in my brain.
Here were funds that had:
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Decades of history
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Massive institutional credibility
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Loyal investor bases
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Consistent income distributions
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Strong long-term total returns
And they all had one thing in common:
They use leverage.
The funds that really caught my attention were:
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PIMCO Corporate & Income Opportunity Fund (PTY)
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PIMCO Dynamic Income Fund (PDI)
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PIMCO Income Strategy Fund (PCM)
Later, I discovered another income powerhouse:
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Virtus InfraCap U.S. Preferred Stock ETF (PFFA)
And suddenly the “leverage is evil” narrative didn’t match reality anymore.
Investors Pay a Premium for a Reason
One of the most fascinating things about PIMCO funds is this:
Investors often pay a premium to own them.
Think about that.
People willingly pay more than the value of the underlying assets just to access:
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PIMCO’s strategy
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Their income stream
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Their long-term track record
Why would rational investors do this?
Because over time, these funds have delivered:
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Reliable monthly income
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Competitive total returns
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Professional use of leverage to enhance yield
The market has essentially said:
“We trust these managers to use leverage responsibly.”
That realization changed everything for me.
The Key Distinction Most People Miss
When people hear “margin,” they picture:
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Risky day trading
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Overleveraged gamblers
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Blowups and margin calls
But professional income funds use leverage very differently.
They use it like a business loan, not a casino chip.
Their goal is simple:
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Borrow at a lower rate
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Invest in income assets yielding more
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Capture the spread for investors
This is not speculation.
This is structured income generation.
And it has been happening for decades.
PFFA: The ETF Version of the Same Philosophy
When I discovered PFFA, it felt like the modern ETF version of this same mindset.
Preferred stocks already sit between stocks and bonds.
They tend to produce strong income on their own.
Add moderate leverage, and suddenly:
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Yield increases
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Income becomes more meaningful
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Cash flow becomes a central focus
Again, this isn’t reckless behavior.
It’s professional portfolio construction.
Why This Matters for Individual Investors
Seeing institutions do this for decades helped me reframe leverage entirely.
Instead of asking:
“Is leverage bad?”
The better question became:
“How is leverage being used?”
Because when used responsibly:
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It can enhance income
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It can improve cash flow
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It can help turn a portfolio into an income-producing asset
In other words:
It can make investing feel more like running a business.
The Real Takeaway
You don’t have to use leverage.
You don’t have to like leverage.
But it’s impossible to ignore this truth:
Some of the most respected income funds in the world have built their entire strategy around it — and investors have rewarded them for decades.
That realization was a cornerstone of my own investing education.
And it’s a big reason why I no longer see leverage as the enemy.
I see it as a tool.
One that must be respected.
One that must be used carefully.
But a tool nonetheless.
Disclaimer
The information provided is for educational and entertainment purposes only and should not be considered financial, investment, or trading advice. I am not a licensed financial advisor. All investing involves risk, including the potential loss of principal. Always do your own research and consult a qualified financial professional before making any financial decisions.
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