Ares Capital (ARCC)

We are spoiled. Have you ever driven a vehicle that did not have cruise control? When I was learning to drive none of the cars we owned had that feature. Cruise control became a standard feature in many vehicles during the 1990s, as it gained popularity and manufacturers began incorporating it into more models. However, it was first introduced in luxury cars in the late 1950s. I can tell you that my parents did not own luxury cars, and even my 1964 Ford Thunderbird did not have this feature.

I also remember a trip we took to Texas to visit some friends when our children were much younger. I picked up the rental car at the Dallas airport. It wasn’t until we were on the highway, headed west, that I discovered the cruise control did not work. Let’s just say that was a very long drive from Dallas to Lubbock. It was over 300 miles and that would have taken us about six hours. I grew tired of having to keep the speed at the right value.

I feel the same way about investing. I don’t want to spend too much time and energy looking for ways to have our investments deliver income and total returns. One set of investments that helps me avoid the exertion and attention are BDCs – Business Development Companies. Three that I really like are ARCC, MAIN, and CSWC.

ARCC as a Total Returns Investment

Many investors are clueless about their returns. Fidelity Investments doesn’t help if you look at just the “price performance.” If you look at that on the Fidelity website you will think that ARCC delivered 10-year returns of 21%. If that were the only return, then ARCC is a terrible investment.

That is why I use the charting feature on Seeking Alpha. If I switch from price returns to total returns, ARCC has a very solid 216.7% total return. MAIN is even better at 265.04% and CSWC is amazing at 403.04%. Sadly, many financial advisors avoid BDCs because of “risk.” Indeed some BDCs are terrible investments. But like most things in life, there are good BDCs and there are those you should not purchase.

The Easy Income Strategy

I believe that investors who value total returns and who value easy income should consider adding BDCs to their investment portfolio. In fact, our grandchildren own shares of ARCC in their UTMA accounts. Most of the people who come to me for investing advice also own shares of MAIN because MAIN provides easy monthly income in the form of a monthly dividend.

Full Disclosure

Cindie and I own 5,700 shares of ARCC. Therefore, with a quarterly dividend of $0.48 per share, our dividend income on June 30 will be $2,736. Although I trade covered call options contracts on our shares of MAIN I don’t currently have options trades for ARCC or CSWC. I’d prefer to keep a focus on more profitable options opportunities.

Recommendation

Evaluate your total returns. Then consider if any investments are not contributing to your total returns. You might have some bonds or bond funds that are actually hurting you more than they help you.

So, do you know the TOTAL returns of your investment portfolio? Certainly if you invest in the S&P 500 index that is easy to know. The S&P 500’s 10-year return is 257.6% as of January 2026, which is higher than its long-term average of 120.3%.

The ten-year total returns of the NASDAQ 100 are impressive. The Nasdaq-100 index had a compound annual growth rate of 16.26% over the last 18 years, with an average annualized return of 16.26% as of March 2026. Between April 28, 2016 and April 28, 2026 the NASDAQ‑100 total return (price-only index change) ≈ +412.3%.

Before you buy any investment, it is prudent to evaluate returns.

Caution for the Novice

If you dislike price volatility, then BDCs are not for you. Anytime you buy an investment you need to think long-term. Realize many investors are thinking only about this week or this month. If you don’t have a five-year view, you are frequently likely to be fearful or at least disappointed. Also, not all BDCs are a good investment.

Conclusion

If you enter the BDC investment space, I suggest that you focus your dollars on three good BDCs instead of trying to buy shares of just one or of many. Focus on those with a track record and that have a rational dividend.

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