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2015/16/17/18 Blended Income Model Portfolio

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Model Constructed 1/4/2015

Because this model was constructed and launched on 1/4/2015, it will LAG in performance by approximately 1/2% as we “charge” the portolio a brokerage fee for the purchases. There will be a delay in dividends as some issues were not owned at the appropriate time to garner January dividends.

This is a blended income portfolio made up of only income-producing securities, which includes dividend-paying common stocks.

The model is just that — a model — not meant to be anyone’s portfolio, but simply a potential portfolio. We are trying to not trade this portfolio often. A key lesson learned in 2014 is that being overweight in a particular sector can be disasterous. For instance, some investors held too many master limited partnerships (MLPs) in 2014 and they were massacred. So when one has good evidence of a downtown in a sector, move to correct the situation by repositioning.

The portfolio is composed of preferred shares, exchange-traded debt, real estate investment trusts (REITs), MLPs, closed-end funds (CEFs), business development companies (BDCs) and dividend-paying common stocks. From time to time, it may contain a U.S. Royalty Trust issue, although we have had little luck with owning these.

Compared to the 2014 portfolio, this model has a smaller number of issues and a weighting that is toward shorter duration instruments (exchange-traded debt with short maturities). Additionally, we are starting at 91% invested as we want to be opportunistic in REITs and potentially energy-related issues if the opportunity presents itself.

This portfolio starts with a beginning balance of $500,000.

Below we show the dividends received and those are added into the beginning balance. This portfolio does not show drawdowns as there are no funds withdrawn from the portfolio.

In the portfolio below, we have “charged” the account a $8 per transaction fee (now we charge just $5 as Fidelity has lowered commissions) and will do so in the future when securities are bought and sold.

We had a goal of a 7% return for 2015.  For 2016 the goal is the same.  It will likely be another tough year for income investors.

We have added both the S&P 500 (ticker: SPY) and Total Bond Fund (ticker: AGG) to the bottom of the spreadsheet — while they are not really benchmarks, they are at least a point of reference to compare the model against.


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