I think from time to time we confuse some newer readers/investors with our talk about various items–like “sock drawers”.
If I remember right Gridbird was one of the original users of the term ‘sock drawer’, which is where he ‘stashed’ his shares of various ‘illiquid’ (shares that very rarely trade) shares that were in his opinion safe and worthy of being put away and not ‘babysat’- for instance from obscure utilities etc.
From his use of the term many of us that have hung around message boards for years pretty much know that if someone says it is a “sock drawer” issue we know what that means. But not everyone knows the meaning of some of the terms that get tossed around–some folks see that term and wonder what the hell is the talk of socks. This is why I’m writing this little blurb on the various drawers.
I personally like to think of a lot of my holdings as those in my “underwear drawer“. These are issues that I hold for very long periods of time, but are not of the high quality of those in the “sock drawer”. For instance I own virtually all of the various Gladstone term preferred issues (Gladstone Land, Gladstone Capital and Gladstone Investment) and I have held their various issues for years. I consider these underwear issues because they are not the highest quality issues, but in a stable economy they perform well and I don’t have to ‘babysit’ them–just collect the monthly dividends.
In my ‘sock drawer‘ I have some Gabelli CEF preferreds such as Gabelli Utility Fund preferreds (GUT-A and C), AllianzGI CEF preferreds NCV-A and NVZ-A), Bancroft (BCV-A) and Ellsworth CEF preferred (ECF-A) , Kayne Anderson term preferred (KYN-F), Tricontinental preferred (TY-P) and others–super high quality, but not the higher coupons.
All issues in my sock and underwear drawers are pretty much ‘permanent’ base holdings and comprise 60-80% of our stock and bond investments. The balance of issues we hold are ‘here today and gone tomorrow’–if the price is right.
A blend of the sock drawer and underwear drawer hopefully provides with a 5.5-6.5% return on those fairly safe investments. Then it is hoped the balance of the accounts can provide a 7-8% return–so a blended return near my goal of 7% (while sleeping well at night).
We encourage readers to chime in on this topic (socks and underwear–I don’t mean boxers or briefs) to help the newer folks figure out our terms.