Even a Blind Monkey Can Earn a Good Return

For years (going back to at least 2013) I have posted model portfolios simply to see what happens to various quality portfolios of income securities over long periods of time–by long periods of time I mean 5 or 10 years.

I started the initial portfolios back in 2013 (I think) and kept tracks of a number of them until 2 years ago and then lost track of them as they were part of the original ‘Yield Hunter’ website which was sold about 5 years ago.

I always set these up to be ‘held’ – not traded – really ‘buy and hold’. I really wanted to see the results from portfolios that were held through thick and thin–through the big ups and downs. I know I had an ‘investment grade’ portfolio, another was ‘short duration’ and I think another was ‘high yield’.

So with the Innovative Income Investor I did the same–set up a couple of portfolios. 1 is ‘High Yield‘ which is all preferreds and baby bonds. I chose issues that at the time of initiation were high yield issues I would be comfortable holding–and in fact I did hold many of them at various times.

The issues in the High Yield Model were mREITs, many energy related issues (midstream, shipping, LNG etc) and some financial issues (BDCs, asset managers etc).

The model can be seen here.

On the portfolio page I make short notes to look at as time goes by. I see the original goal on 1/25/2018 for the annual return was 8.25% and then I see on 9/30/2019 I lowered the goal to a more realistic goal of 7.50% given the direction of interest rates.

On 3/19/2020 I wrote that the model was down 43% earlier in the week. and on 8/20/20 I wrote that the model was up 7.75% since inception.

Currently–just adding in recent dividends the model is up 18.83% with a month to go until the 3rd anniversary–so let’s say the model is likely to end around 19.50% for the 1st 3 years–an average of 6.5%/year.

And that is how a blind monkey earns a pretty good return without babysitting their pretty junky portfolio.

PS–no blind monkeys were actually used for this model–nor were any monkeys with sight.

11 thoughts on “Even a Blind Monkey Can Earn a Good Return”

  1. A decent 5.5% Coupon Ba1 rated baby bond UZE is trading below par today.

    Is this a ‘decent deal’ or does USM has some negative news that I am unable to find?

  2. Have to make a comment here since two other friends and I used to call ourselves Team Turtle as opposed to monkeys.
    Monkeys will imitate each other and continue to mindlessly throw darts no matter the environment. Kind of a day trader mentality.
    Turtles are more solitary, contrarian loners. When they crawl over the stock page. they may…or may not poop on something. Just go on holding, just for a while and observe…the monkeys. In 1999 that helped.
    I think Tim’s allocation was turtle.
    Happy Holidays to all the good people here!

  3. I will publish the year end stats after the close on New Years Eve, but barring something major, the median preferred will have a positive total return for the year. Of course, there are many that will be down >50%, like CBL*, SOHO*, MDL*, PEI* etc. But picking a well diversified group of preferreds will have turned out OK. . .

    Those of a certain age might recall reading the “Media General Financial Weekly” back in the day. They were way ahead of their time and used to publish randomly generated stock portfolios for annual returns. I did not do it in advance, but might do it for preferreds/babys to see how it looked for 2020. It would be more meaningful that publishing the returns for individual security. . .

    1. Tex the 2nd–I believe you are correct that the median preferred will be up on the year–of course that doesn’t help the typical individual investor who bought high and then bailed at the bottom with fear.

    1. @Girdbrid,

      LOL to your comment. You could compile a nice list by adding others, Morwa and Askola for starters.

      1. Ron, please be gentle on Askola, its not his fault the cranial capacity is lacking, and who can blame the guy for trying to make a living by not really working?
        Morwa? I just vaguely remember that name. Is that his first or last name? Cant remember if its Moron Morwa or Morwa Moron.

    2. That’s the age old model. The Q is where would you put your money? It’s hard to follow the monkey.

      Just yesterday I discovered I had held a chinese co position for my ex. I had forgotten about it!! She was 40% cash and still up 75% on the year. I’m not quite sure what to make of that. Time heals all wounds? Things sometime best ignored? Hind sight is 20/20? Don’t sell too soon??

      1. IYP–it’s all about buying companies that don’t go broke and not selling out at the bottom – buy high sell low–the bane of the individual investor.

        1. IBD preaches the exact opposite. I’ve learned to not try to buy the turn around candidates . Falling patterns are falling for a reason. Obviously in bond land it’s different story.

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