At March 23, 2018, the S & P 500 (at $2,588.26) was down approximately 10 percent from its January 26, 2018 all time high of $2,872.87, and down about 3.2percent for the year, presumably in anticipation of an impending trade warfare.
Also, interest rate sensitive stocks were trading near 52 week low rates as bond and other fixed income speculators drop stock in anticipation of three 2018 interest rate hikes.
Of course, a marketplace situation like this is hard for:
- Important marketplace participants (institutional investors) whose bail stocks are decreasing in cost.
- Stock market speculators in far too higher PE and reduced or no dividend stocks.
- Income concentrated}investors (retirees and"soontobes") who hold positions in illiquid individual fixed income securities.
- 401k savings account holders whose pooled investment portfolios are, by design, much too heavily invested in stocks.
However, it's the perfect storm of chance for Economy Cycle Investment Management (MCIM) portfolios. The MCIM procedure focuses solely on basically sound, S & P B+ or greater rated stocks of lucrative, dividend paying, businesses (Investment Grade Value Stocks). No person stocks are bought until they're investing in 20% below their 52 week highs.
MCIM Programs are diversified in many ways, and each safety pays dividends or interest. New problems, NASDAQ businesses, and Mutual Funds don't have any location in MCIM portfolios, which likewise have rigorous profit taking areas that remove the pain of seeing major gains slide away during corrections. Also,"cost based" asset allocation precludes the requirement for portfolio"re-balancing" while promising annual revenue increase with a 40 percent or greater income goal asset allocation.
While markets climb to record high levels, the lack of individual equity investment opportunities is ameliorated with the use of equity Closed End Funds (CEFs). These are managed, classically diversified, "real time" tradeable, portfolios covering most market sectors while providing much higher than normal (after expenses) income.
- From the income goal"bucket", well diversified income CEFs (both non and tax-free) are utilized to guarantee higher than ordinary earnings from many kinds of typically illiquid securities... securities that (in CEFs kind ) magically become accessible liquid kind.
How have IGVS equities and CEFs fared {in|at} the three big meltdowns of the lifetimes?
- Back in 1987, IGVS equities were the first to recover, and there were not any business failures or dividend reductions; couple CEFs existed in the time and they weren't a significant portfolio holding, however human interest rate sensitive securities rallied as interest rates had been reduced.
- In 1999, IGVS equities and many CEFs failed to"bubble" and the NASDAQ, and rallied strongly throughout the flight to quality which followed the dot-com crisis. "No NASDAQ, no new problems, no Mutual Funds" was a winning credo afterward, as it ought to be at the upcoming significant correction.
- In 2008, everything tanked and three or two fiscal agencies IGVS companies were defeated at the government witch hunt. In general there were couple dividend reductions in stocks, as IGVS businesses benefitting in the base at a slightly faster rate compared to S & P 500 through 2014. Income CEFs, however, outperformed the whole stock market from 2007 through late 2012, while keeping their dividends before 2016 or so, when tax-free CEF yields started to fall.
Therefore, although some managed portfolios might have intrinsic quality, diversification, and earnings issues throughout corrections, MCIM portfolios have fresh investment opportunities. Though some investment portfolios need to deplete funds to pay annual income to customers, the huge majority of MCIM portfolios have surplus income that's used to grow funds in any market scenario.
Four forms of investment chance exist because this is written:
- The amount of IGVS equities decreasing 20% below 52 week high degrees is increasing.
- There are roughly forty mainly equity CEFs, representing a vast array of market industries, with present returns between 7 percent and 9% after all inner expenses and fees.
- There are no less than sixty-one taxable income CEFs, representing a vast array of security forms, with present yields between 7.5% and 9.5% following all inner expenses and fees}.
- You will find at rental thirty-one federally tax free income CEFs paying between 6% and 6.6%, following all inner expenses and fees.To your long-term portfolio wellness, ensure you make the most of these... that moment. It has been ten years since the last substantial market correction, and it simply makes sense to utilize an investment medium that offers the essential fuel to add to places at reduced costs.The"add to at reduced costs" strategy is especially effective with CEFs, at which each inclusion:
- Reduces your price basis, speeding the yield of profit taking chances.
- Increases your own dividend yield on the safety, also.
- Boost your yearly portfolio earnings.
What is that old Boy Scout motto? Right...
My posts always clarify aspects of the investment procedure I have been employing as the 1970's, as explained in my novel, The Brainwashing of the American Investor. Each of the areas, theories, and procedures explained there work together to make (in my experience) a much safer, more income effective, investment expertise. No implementation ought to be undertaken without a comprehensive comprehension of all parts of this program.