Building a New Conservative Portfolio

As most of you know we build portfolios to ‘test’ performance of various combinations of investments.  Generally we build them to see how the combinations perform against expected economic conditions in the year ahead (‘expected’ conditions may or may not ever occur) and we set these up with our own circumstances in mind.  It is impossible to take our readers into consideration when we build these as the variables are too diverse.

Many of the various portfolios are posted on the top of each page under the ‘Portfolios’ tab. Over our 7 or 8 years of building portfolios we have generally had good performance, relative to similar types of conservative investments–although we have loser portfolios from time to time.

Currently we have 2 active portfolios running on the website. They are–

2015 Blended Income Model Portfolio

This model has a gain YTD of 2.61%, but has had gains as high as 4.75% earlier in the year.  This model has been set up to have the potential for capital gains, while garnering a decent income flow as well. With the potential for capital gains comes the potential for capital losses and with common stocks and REITs performing somewhat poorly we have taken capital losses in these areas while collecting dividends and interest on the rest of the model.  These dividends and interest have more than offset the capital losses thus the gain for the year.  We have now positioned this model to expect somewhat higher interest rates later this year (which may or may not occur).

2014/2015 Short/Medium Duration Income Portfolio

This model was set up in October, 2014 to be focused on a decent income with securities that should have less volatility as interest rates moves somewhat higher.  Most of the issues in the model are exchange traded debt issues and have maturity dates not more than 8 years out (versus the more typical 20 or 30 years of most exchange traded debt issues or perpetual nature of most preferreds).  There are also 3 ‘term’ preferred issues in the model.

Thus far this model has performed perfectly. Since inception (9 months) the model is up 5.80% and has not moved more than 3/10th’s of a percent in any given day.  For now we expect this model to continue to perform well.

We will let this model continue to run–BUT if we get economic weakness in the quarters ahead some of the debt issues will have to be sold as many of them are not investment grade and one must watch the quarterly income statements from these companies.

So with current economic conditions in mind and with our thoughts that short term rates are going to move higher by year end we are putting together another model. Currently we have our personal holdings similar to the 2014/2015 Short/Medium Duration Income Portfolio—with one exception.  We personally have some REITs in our accounts. So the new Medium Duration Income Portfolio will include a few (just a few 3-5) other issues beyond preferreds and exchange traded debt. The idea being that we will try to add just a little yield to the otherwise very conservative portfolio. 

We will have this model launched yet this week–not certain of which day, but before the week is out.