Don’t Forget That Slow and Steady May Win the Race

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Just a reminder that while our Short/Medium Duration Income Portfolio may not be sexy, and may be downright boring it has been the most productive portfolio of the year. Since October this conservative portfolio has tossed off a 4.7% return—that is over 9% on an annual basis.

Let’s review what this portfolio is about.  Only short and medium duration Exchange Traded Debt and Term Preferreds are included. No issues are sold and none bought (unless there is a redemption in which case we select a replacement).  The initial portfolio yield was 6.7% and it is now 6.64%.  The intent is to collect the dividends and interest and not plan on any capital gains.  Plain and simple–garner a solid and significant income with issues that mostly come due within 8 years.  This gives protection in case of interest rate increases as there will generally be less negative movement in these issues than perpetual preferred stocks (this portfolio has never moved more than 1/3% in any day). Using debt instead of preferreds gives a layer of protection on the capital ladder (and two of the three preferreds used at rated ‘AA’).  All in all a pretty relaxing way to invest if you are at that stage in your life where you simply want a somewhat stable income stream.

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