Ultra-Conservative Retirement Portfolio for the Next 3 Years

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 |  Includes: ABT, BPT, CLX, CTL, ED, GOGL, GPC, GRMN, GTU, KMB, KMP, KO, LLY, LNT, NLY, PG, PSLV, SIVR, SJT, SLW, SO, SPH, T, TEF, TEG, TNH
by: Golden Economizer

Here is another portfolio based on the series of articles that includes: A Simple Retirement Portfolio for the Next 3 Years, an Aggressive Retirement Portfolio for the Next 3 Years and a Conservative Retirement Portfolio for the Next 3 Years.

Since I recommend for every investor to have a minimum of 50% of their capital invested currently in physical precious metals, (primarily silver bullion), this would not be a portfolio that I would actually recommend since, at a 33% total position, it is underweighted in precious metals in my opinion. But some retirees are fixated on the present income delivered by a portfolio rather than its total return, and others just can’t get beyond the mindset that if some diversification is good, more diversification must be better. So this portfolio is presented as a compromise that recommends a precious metals concentration much higher than a traditional investment advisor would, enough to goose the overall performance of the portfolio, yet not as much as I would recommend. And of course it is designed for the investor who just won’t make the jump into owning physical bullion, but would like to ride the precious metals market bull toward the goal of superior performance. Owning physical bullion is far preferable as it removes many layers of counterparty risk in precious metals investing.

So even in this ultra-conservative model portfolio, I must stick to my principles and include a heavy concentration of silver as a core position, and not include bonds of any kind, even though the traditional retirement planner would be including up to 80% bonds. This may have made sense at one point in time, but we are now looking at an impending burst of the bond bubble, and interest rates really have nowhere to go but up.

TICKER

% ALLOCATION

YIELD

COMPANY

SECTOR/BUSINESS

SIVR

15%

none

ETFS Physical Silver Shares

PM Physical Trust

PSLV

10%

none

Sprott Physical Silver Trust ET

PM Physical Trust

GTU

4%

none

Central Gold Trust of Canada

PM Physical Trust

SLW

4%

none

Silver Wheaton Corp

PM Marketting

BPT

4%

8.2%

BP PRUDHOE RT

Oil Pipeline

SJT

4%

6.8%

SAN JUAN BASIN RT

Nat Gas Pipelines

T

4%

6.1%

AT&T

Telecom

KMP

4%

6.2%

KINDER MORGAN ENERGY

Gas/Oil Pipelines

PG

3%

3.2%

PROCTOR & GAMBLE

Consumer Staples

LNT

3%

4.4%

ALLIANT ENERGY

Electric/Gas Utility

NLY

3%

14.4%

ANNALY MORTGAGE

Mortgage REIT

TEF

3%

5.8%

TELEFONICA

Telecom (Foreign)

ABT

3%

4.0%

ABBOTT LABS

Pharmaceutical

CLX

3%

3.2%

CLOROX CO

Consumer Staples

CTL

4%

7.1%

CENTURYLINK, INC

Telecom

KO

3%

3.0%

COCA COLA CO

Food

ED

4%

4.8%

CONSOLIDATED EDISON

Utility

GRMN

4%

4.4%

GARMIN LTD

Technology

SO

3%

4.7%

SOUTHERN CO

Utility

VLCCF

3%

8.4%

KNIGHTSBRIDGE TANKERS, LTD

Shipping

LLY

2%

5.7%

ELI LILLY & CO

Pharmaceutical

GPC

2%

3.4%

GENUINE PARTS CO

Auto Parts

TEG

2%

5.4%

INTEGRYS ENERGY

Utility

KMB

2%

4.3%

KIMBERLY CLARK CORP

Consumer Staples

TNH

2%

5.2%

TERRA NITROGEN CO

Agricultural Chemicals

SPH

2%

6.1%

SUBURBAN PROPANE

Propane

Total

100%

4.8% avg

Click to enlarge

The first thirteen holdings of the ultra conservative model portfolio were discussed in yesterday’s article, Conservative Retirement Portfolio for the Next 3 Years.

The average dividend yield of the entire portfolio (26 holdings) is 4.8%, and the average yield of the 22 holdings that pay a dividend is 5.67%

Clorox Corp (NYSE:CLX) is a very conservative holding yielding only 3.2% currently with an incredibly constant income stream which should cover the dividend in any economy, good or bad. It has also returned a nice 75% capital gain over the last ten years, and increased their dividend for 33 straight years. The product line is primarily necessities, not luxuries.

CenturyLink, Inc (NYSE:CTL) is a telephone and internet provider based in Louisiana with 7 million lines, with a substantial current yield and a 35 year history of consecutive dividend increases. It is riding the trend of expanding internet usage and population growth.

Coca Cola Company (NYSE:KO) needs no introduction to anyone in the civilized world, and is yielding only a conservative 3.0% currently, but has a 49 year history of consecutive dividend increases, and will benefit from world population growth in good or bad economic times.

Consolidated Edison (Ed) is the gas and electric utility in New York City and surrounding areas and pays a generous 4.8% yield with an extremely low risk business model. It’s returned a nice 65% capital gain over the last decade, as well as having increased its dividend for 37 straight years.

Garmin Ltd (NASDAQ:GRMN) is the world leader in consumer satellite navigation and avionics. I am avoiding tech stocks at this time, but Garmin is the strongest player in a growing market, has returned nearly 300% in capital gains in the last decade, has no debt, high cash on hand, and low price to cash flow as well as a generous 4.4% dividend. How can you lose? Well, we’ll see in three years.

Southern Corp (NYSE:SO), is a large electric utility with over 4 million customers throughout the southeast with a juicy 4.7% dividend. It is riding the population growth demographic, and has raised its dividend for the last nine years.

Knightsbridge Tankers, LTD (VLCCF) is a shipping company that is a solid dividend payer over the years with a very juicy 8.4% current yield, and has produced a 100% capital gain over the past decade. It is riding the trend of peak oil.

Eli Lilly (NYSE:LLY) is one of the largest companies that is almost purely in pharmaceuticals, and has paid dividends continuously for over 100 years. Even though it broke its streak of 44 straight years of dividend increases a few years ago, I believe it will be able to maintain the dividend at this level (5.7%) for 3 years and beyond, despite the risk of drugs coming off patent protection. This one bears watching for eventual removal, but at 5.7% yield, it is paying 2.3% more than the current 10 year US Treasury Yield.

Genuine Parts Co. (NYSE:GPC) is a large distributor of auto parts, which owns the NAPA brand name among others. It pays a generous 3.4% yield, and has increased the dividend for 55 straight years, while producing a 100% capital gain over the last ten years. It is riding the population growth trend, as well as the dependence of Americans on their vehicles.

Integrys Energy (NYSE:TEG) is a gas and electric utility in the northern US and Canada, which has paid a dividend for over 70 years. It has doubled in the past ten years, and currently pays a nice 5.7% yield. It’s a safe business as gas and electric use increase year after year with the population.

Kimberly Clark Co (NYSE:KMB) is the manufacturer of consumer products that are considered necessities of life, which will sell in both bad times and good, and will expand with population growth. It is a big player in personal health care and paper products. The 4.3% current yield is fairly generous considering how safe the business model is, and it has grown the dividend for 39 straight years.

Terra Nitrogen (NYSE:TNH) is a large supplier of agricultural chemicals to supply the ever growing world population with future food. Although the dividend has fluctuated over the years, I like the future prospects, and the current yield of 5.2% Its large cash position should help insure that its dividend is reliably paid over the next three years.

Suburban Propane (NYSE:SPH) is a large, very well run supplier of propane in 30 US States, which is riding the trend of peak oil, among others. With 13 straight years of dividend growth, and a current yield of 6.1%, it is a solid choice for income over the next three years.

I will be checking in on this, and the other three portfolios one year, two years and three years from now for possible adjustments, and to monitor progress and compare to standard portfolios and indexes.

Disclaimer: I am not a professional financial planner. I am a macroeconomist with an interest in retirement planning and helping people preserve their life savings from the ravages of mismanaged government policy and corporatism. I believe that following the obvious macroeconomic trends will make you more money than focusing on individual investments and sectors. Today in 2011, the most important trends to follow are the multi year price imbalance in the precious metals market, peak oil, the continual devaluation of the dollar and all fiat currencies, world population growth, baby boomer demographics, the continual decline in the housing market, and the insolvency of the banking/financial/insurance sector. To keep things simple, the goal is to limit the portfolios to no more than ten to twenty individual holdings. Mutual funds, ETFs, ETNs and derivatives of any kind are to be avoided, although physical precious metals funds are necessary to substitute for physical bullion holdings.

Excessive diversification for the sake of diversification may limit your losses but will also limit your gains. Concentration is obviously good if concentrated in the correct areas. Traditional retirement allocations have included both stocks and bonds based on past performance that bonds would often perform opposite to stocks. In the coming few years, I believe that the bond bubble will burst, and stocks will also perform poorly. A portfolio of precious metals, certain commodities, and carefully chosen stocks will outperform. I’m currently avoiding all retailers, bankers and homebuilders based on the current economic conditions.

I would advise any investor at this time to have at least 50% of their investment capital in physical silver and gold bullion to protect against the coming currency collapse. You would need to achieve incredibly high, unrealistic investment returns to compensate for the fact that the US dollar is losing 50% of its purchasing power every 10 years. But since most people are too complacent or find other objections to investing in physical bullion, my model portfolios are designed for use in self directed retirement accounts by those who won’t follow my good advice to purchase physical bullion. All are designed as long term buy and holds with a minimum time horizon of five years. Portfolios should be examined once or twice a year to insure that all holdings are still compatible with current macroeconomic trends, and have not cut dividends. I’m not interested in the many short term trading strategies using these same trends that may produce higher returns, as these are time consuming to actively manage, and assume more risk. I’m interested in helping the individual investor who prefers to manage his own assets, while getting superior total return without wasting money on a professional who gets paid no matter how poor the results. Do not use this model portfolio as investment advice. Your own portfolio should be customized for your individual situation. Always consult a financial professional, but avoid the 98% of financial professionals that don't think for themselves, and don't have a thorough knowledge of the fundamentals and long term trends in the precious metals markets, peak oil, and other macroeconomic trends.


Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.