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Prospect Capital Corporation Message Board

  • mysonchino mysonchino May 24, 2014 2:29 PM Flag

    Constructing an income retirement portfolio

    I retired 19 years ago at age 41. Good planning, a great wife and no disasters to derail our plan. I buy only income vehicles. My target rate when shopping for a new investment is 8%. My portfolio is broken down as follows. Equity option income closed end funds 20%; BDCs 14%; MREITs 10%; Preferred closed end funds 29%; Individual preferreds 7.5%; SDRL 3.3%; OXLC 4.5% Cash and tax credits 10%.

    I got burned in the last crash with too many financial reits so am a bit more conservative now. Over the next few years I plan to add Individual equity reits and looking for an average yield there of &.5 to 7%(GOOD; APTS; ACRP;DOC; and HPC are on my watch list.

    My strategy is to live on about 50% of portfolio income and invest the remainder for more income. So far so good. In 2 years social security kicks in and my budget will drop to under 40% of total income. If you don't reach on life style you can reach for yield and sleep well at night. If you live on less you are never forced to sell as cash flow takes care of you. I always stay fully invested and invest when ever I have the cash. If you need cash for something you can use margin or plan ahead and accumulate the free cash flow.

    My method is not flashy. I rarely make a killing on a stock but have found what works for me and just love the smell of coffee and extra cash flow in the morning. The best investment advice I can give anyone who wants it is to Formulate a reasonable plan(needn't be complicated). Be patient and discipline and stick to your plan. Be realistic as to what the market can do for you and enjoy your life. Good luck.

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    • i want to know how you retired at 41. thats dope.

    • american_patriot_man american_patriot_man May 28, 2014 12:38 PM Flag

      MySon...better research that Social Security part of your plan...Bush & the Republicans changed may not be able to collect your have to pay so many quarters in the last 10 years in order to collect...also the amount of quarters and the amount you paid determeines your benefits.........One other thing....Bush/GOP made it harder to collect.....If you make more than $26,000($33,000 joint) including SS'll have to pay back $50 on every dollar over that amount........the GOP has screwed the middle class again

    • mysonchino, I'm curious to know why you don't own any MLPs in your portfolio? I'm not saying to buy any right now since most are richly valued along with the rest of the market. But, all in all, they have been a *very* nice source of cash flow and dependable distribution increases each year if you stick to the blue chips. Or, you can add a touch of risk by owning an upstream MLP yielding over 10%.

      I also think some of the general partners in the MLP space are worth looking at. Right now I own ENLC, KMI, and PAGP. These are fine to hold inside an IRA because they issue 1099 and not K1 forms for taxes. The yield is lower, but the rate of distribution increase is higher.

    • Everything I've read suggests a person at retirement age should only have a small portion in stocks if any at all.

      • 1 Reply to amamale2002
      • threecardmontypython threecardmontypython May 25, 2014 12:24 PM Flag

        Only if they're independently wealthy. You think the average retiree today can get buy on the 2-3% treasury yields or the 1% in CD's? What would you suggest the retiree have their money in? Annuities are now paying about 3%, bonds 3% for safety, 5-6% for junk, but why have money in junk bonds and not stocks? Have no idea what you're reading but it's the wrong thing. What little inflation we've had over the past few years would not have been covered by those investments. What happens when inflation goes up to 3-4%, or higher. Imagine $500k nest egg garnering 3% in 30 year treasury's = $15k a year in income. How about $500k in stocks yielding a conservative 6% = $30k a year. One has to take their own risk tolerance into consideration but to say little if any investments in the stock market at retirement is ridiculous.

    • Myson:

      You gloss over the most important part of your plan. The part where you say --"and no disasters to derail our plan" Even with "a great wife" and "good planning" sometimes the most important part is to have luck to avoid sickness-disabilities and even death of a loved one that seem to creep into many people's lives to derail or delay plans.
      How someone deals with disasters in their everyday life is more important .


      • 1 Reply to buyandwin
      • Sorry if I sounded like I was glossing over "good fortune". I was intending to convey just the opposite. I had a good plan, patience and discipline. None of that would have mattered if I got run over by a bus, come down with terminal cancer, got divorced or got fired from a great job.My point still is a simple one. It is not complicated to achieve more than what is commonly thought possible. It is difficult because we as people always want more and more and sooner than accommodates asset accumulation. However, an investor has to have an overriding awareness of what 1) they want, 2) when they want it 3) realize they must sacrifice life style to accelerate accomplishment and 4) be strong willed enough to continue to pursue what works for you while understanding risks at the same time.

        Now, many good points were made about trading, buying on SPOs, buying during tax loss season etc. I pay little attention to these things. I invest my cash whenever I have about 10,000 of cash available to invest. I buy the best dividend vehicle available at that time. It may be a SPO, or it may be a bargain because of tax loss selling. Whatever seems like the best deal at the time I buy. I hold and I collect the dividends. The value of the portfolio is not as important as the cash flow as long as I believe in the continuity of the cash flow.Because I live on less than 50% of the cash flow I can be wrong some times and still have net investment increases thus more income for the year. Boring, month after month, year after year and on and on.

    • My personal strategy is to buy heavy in last two weeks of year as investors sell losers and funds window dress. I hold these Preferred for two Dividends and sell in April. I also trade Dividend stocks heavily October through April playing the run up and keeping hold to a minimum. I sold everything end of April and plan to stay out through September unless we have a big correction. I previous years I traded through the Summer and lost. For 2012 and 2013 I averaged a 6.5% portfolio gain , so far for 2014 up 10.72% and only taking a shot at sitting ducks. Phil

      • 1 Reply to mr.phil2u
      • marthaandthevidaliaonions marthaandthevidaliaonions May 25, 2014 10:23 AM Flag

        mr.phil: Question as to your preferred stragegy. I'll assume you buy them for the dividend/yield with very little expectation of capital gains. If you make the preferred investment for the yield, why would you sell after 2 dividends? I hold preferreds for the little less risk than the same company's common shares and if I get my 7.5-8.5% yield I'll hold forever, or until it's called. For me there's no thought of a capital gain on a preferred UNLESS there's a situation like 2008 when they were almost cut in half. I certainly wouldn't call your style of investing "constructing a retirement portfolio" as this thread suggests. You apparently do a lot of trading in and out. A retirement portfolio would consist of much more stable investments with much less trading (unless a situation arises).

    • Good advice. You have been a valuable contributor.

      The only thing I would add is don't pay 'retail' for BDCs, merit, mlps etc. They almost all do SPOs, have bad quarters, have etc. Have a target list, be patient and buy when they tank.

      If you buy at full retail and they tank, you can easily lose 1-2 years worth of dividends.

    • very impressive.
      You might check out Just Energy(JE) and Pengrowth Energy PGH) for your portfolio.

    • If you are happy and satisfied.. that is all that counts. Stay with it.

    • cash flow and coffee yummy!

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