The portfolio performed very well given the circumstances in the last year. The model is too heavy into energy related issues and we will start to either sell some of these issues or reduce expose. We now have the largest number of positions ever in this model which was started 1/2018. With a gain as of today 22.15% in the 3 years we are right on target with our goals. The portfolio has 11.5% cash.
After being down 43% at the low point of the ‘pandemic market’ the portfolio is working its say back and now stands at a +7.75%. This is the ultimate test of a low quality, high yield, buy and hold portfolio. No issues have been bought or sold during the Covid 19 Pandemic.
Markets have been pummeled and this portfolio proves that having low quality, high yield securities presents giant losses in this Covid 19 driven market. This account fell as low as -43% earlier this week–and this was from a +18% a month ago. Massive losses–but this is total buy and hold and we plan to simply ‘let it ride’.
As of this date we have reset the goal for this long term portfolio to a more realistic goal of 7.50% annually given the low interest rate environment we are in.
Below we have begun the construction of the 1st model portfolio within this website.
This model is a high yield model with a target return of 8.25% annually (over a course of years). Obviously this model will require a riskier profile to meet our goal, but it is worth the effort to test whether we can achieve this goal over the course of a number of years.
We will use a combination of preferred stocks, baby bonds, closed end funds and just maybe the occasional high yield common stock to try to achieve our goal.
As always we will not be “trading” this model. Positions will remain intact unless issuer company fundamentals indicate a change is needed.
The starting value of the portfolio will be $100,000 and will be composed of around 7-14 issues (revised).
As always we will charge both a purchase and sale commission and we will use $4.95 which is our Fidelity commission.
For the purposes of this model we will assume the portfolio is in a retirement type of account, thus we will not worry about whether dividends are qualified for preferential tax treatment
As always we will try to get up to 90% invested as quickly as possible, but it may take a few weeks (hopefully not later than March 1, 2018).
Note that if interest rates move sharply higher from current levels (2.75% on the 10 year treasury as we write) perpetual preferred stocks will move lower in price.
The performance of this model should be looked at over the course of a number of years–not a few days or weeks.
NOTE–we do not personally invest in much high yield and are 95% in short/medium duration term preferreds and baby bonds, but we do own a couple of high yield issues.
NOTE–this is not a recommendation to buy any security. We use the portfolio primarily for educational purposes.