Seeking Alpha

Gratian's  Instablog

Gratian
Send Message
Gratian is private self directed investor, managing Roth IRA & Traditional IRA retirement accounts, plus taxable accounts constructed to provide additional income to existing employer sponsored retirement plans. Gratian is a contrarian investor with a fondness of investing in companies that... More
  • My Mortgage ATM: June Portfolio Results 8 comments
    Jun 29, 2014 12:46 PM | about stocks: ORC, PSEC, LTS, ARCP

    My Mortgage ATM: June Portfolio Results Summary

    1. Review June portfolio results for My Mortgage ATM cash machine.
    2. Portfolio allocation = 50% exchange traded securities/50% managed no load bond funds.
    3. Distribute 50% of interest and dividend earnings each month to Mortgage Checking Account.
    4. Reinvest 50% of interest and dividend earnings each month into My Mortgage ATM Account.
    5. Objective is for the Mortgage Brokerage Account to produce more income each month to reduce my mortgage expenses

    Introduction:

    Special Notice: Due to the Holiday week, I am publishing the June Mortgage ATM results a little early, which means the screen print outs and results, will be missing one (1) day of results.

    Mortgage ATM had a very good month in June, which shows how an individual with a little amount of cash contributions can start the process of creating a monthly paycheck, before retirement, via a taxable brokerage account, to supplement the household expenses.

    We will continue the process of selecting different types of financial instruments to diversify our holdings to mitigate risk, while increasing dividend and interest growth each month.

    Our Guidelines:

    Once again, our guidelines, NOT RULES, just guidelines that will allow us to have a game plan, but also take advantage of any type of opportunity the market may toss our way.

    1. Portfolio allocation = 50% exchange traded securities/50% managed bond funds
    2. Weekly contributions = $50 to $100
    3. Extra cash will go in the managed bond fund until sufficient funds for additional purchases.
    4. All purchases will be at least $1,000 (exception our managed bond fund)
    5. Transfer to Mortgage Account 50% of interest and dividends.
    6. Reinvest to Brokerage Account 50% of interest and dividends.
    7. A Noah Ark strategy of investments, 2 RIETS, 2 CEF's, 2 ETF's, 2 MLP's, 2 DGI Stocks, etc….
    8. No investment less than 3% yield, unless it is for a very good reason, perhaps to capture appreciation as part of our Total Return Strategy.

    My Mortgage ATM Portfolio June Results:

    In June we saw a new equity position established in the portfolio. American Realty Capital Properties (NASDAQ:ARCP), is a triple net REIT that pays monthly dividends and has received a lot of negative sentiment from recent decisions that resulted in dilution or reduction of share prices. Sometimes the market will provide opportunities from time to time, to buy companies at a discount price. We now have two (2) REIT's in the portfolio and next month we will look for another sector or industry to choose from to increase diversification of our income stream.

    Please review the screen shot below from my WSJ Portfolio tracker showing June Total Return results.

    (click to enlarge)

    Current Portfolio Positions and Current position Yields (as per Morningstar)

    1. LTSPRA is a preferred stock, currently with a Current Yield of 9.07% (06/29/2014)
    2. ORC is a Mortgage REIT, currently with a Current Yield of 14.83%% (06/29/2014)
    3. ARCP is a REIT, currently with a Current Yield of 7.68% (06/29/2014)
    4. PSEC is a BDC, currently with a Current Yield of 12.60% (06/29/2014)
    5. USHYX is a Managed No Load, NTF Bond Fund, currently with a Current Yield of 5.68% TTM (06/29/2014)

    (Screen shot below on 6/29/2014)

    (click to enlarge)

    A couple of items in the above screen shot of the brokerage account to review for June.

    1. Total Market Value increased from $5,865.44 May 31st balance to $6,263.08 June 29th
    2. Total Unrealized Gains increased to $46.33
    3. New position was established in (ARCP) which will increase next months cash flow.

    (click to enlarge)

    Diversification Strategy:

    Reviewing the summary of our Mortgage ATM brokerage account indicates greater diversification this month due to our ARCP Purchase. We have drifted away from our 50% bond objective, which is something to keep in mind for future portfolio purchases.

    June Mortgage ATM Activity and Transactions:

    (click to enlarge)

    Total June Dividends and interest = $42.86

    Total Projected July Dividends and interest = $51.93

    Total June Contributions = $250

    Total June Reinvestment = $21.43

    Total June Distribution to Mortgage Checking Account = $21.43

    Special Note: (NYSEMKT:ORC) qualified dividend of $18.00 will arrive in the account tomorrow, but do to the Holiday week, I decided to publish this article a little early.

    Distributions transferred from Mortgage ATM Brokerage Account

    06/29/2014

    Cash Disbursement

     

    FUNDS TRNFR MORTGAGE

      

    -$21.43

           

    My Mortgage Checking Account

    This account is set up exclusively in order to pay our existing household mortgage payment of $1,700.00 dollars each month. The following screen print illustrates how the mortgage ATM is reducing the amount of principle required for me to pay each month.

    Special Note: Our monthly distribution to our Mortgage Checking Account saw a reduction, due to our new guideline of 50% distribution and reinvesting the other 50%.

    (click to enlarge)

    Special Note: The $21.43 Distribution for June has not yet arrived in the Mortgage Checking Account.

    Conclusion

    I believe we are marching along nicely with our objective of increasing dividend and interest growth by reinvesting 50% of earnings back into the My Mortgage ATM and distributing the other 50% to supplement our Mortgage payment.

    Remember, slow and steady will always win the race when it come to increasing wealth and financial security.

    Once again, remember, this is a fun educational portfolio example to show how a taxable brokerage account with high yield investments can reduce the amount of dollars you are required to provide each month for your household expenses.

    Full Disclosure:

    I am not an Investment Advisor and I offer the Mortgage ATM as an example of how to work with a portfolio for educational purposes.

    Investing in the stock market is RISKY and you can lose REAL MONEY! Always conduct your own due diligence or seek the advice of an Investment Adviser, before investing your hard earned DOLLARS.

    A well-diversified portfolio with attention to asset allocations and position sizing will go a long way to mitigate market risk!

    Next portfolio update will be in August; however, I will provide weekly updates in the comment thread.

    If anyone has a question please forward and I'll do my best to answer to provide an answer.

    Best wishes and hope all has a wonderful 4th of July! gratian

    Disclosure: The author is long ORC, PSEC, LTS, ARCP.

    Additional disclosure: I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for this instablog article. I have no business relationship with any company whose stock is mentioned in this article.

    Stocks: ORC, PSEC, LTS, ARCP
Back To Gratian's Instablog HomePage »

Instablogs are blogs which are instantly set up and networked within the Seeking Alpha community. Instablog posts are not selected, edited or screened by Seeking Alpha editors, in contrast to contributors' articles.

Comments (8)
Track new comments
  • Miz Magic DiviDogs
    , contributor
    Comments (4323) | Send Message
     
    Hi, Grat ~

     

    Great idea! We just started a discretionary portfolio for my daughter in order for her to buy a house. We also have PSEC and ORC in hers (and mine).

     

    I think you're low on ORC's yield, though. It's at 16.5% at today's closing price of $13.06.

     

    Miz
    1 Jul, 01:27 AM Reply Like
  • Gratian
    , contributor
    Comments (3258) | Send Message
     
    Author’s reply » Miz,

     

    Thank you, hopefully this taxable account example will put it on the radar scope for the younger folks. You do not have to wait until retirement to receive an additional paycheck.

     

    As for my kids, I keep everything titled in the name of the trust or within a family LLC.

     

    For investments, usually you can use the LLC and have the voting owners as your trust, then give your kids a % of the non voting shares as time passes, staying under or within gift tax laws. If the investment account is small just use the trust.

     

    My older son lives in a townhouse that I own in another city, but it is titled in my trust. He will not receive ownership until me and my better half depart for greener pastures, let's just hope that's a little ways off :)

     

    Anyway, you have to watch out for divorces and other issues the children can run into as they learn life's lessons..

     

    As for the yield, I got lazy and just did a copy and paste from Morningstar without doing the math, sorry :(

     

    Hope you and your daughter have a wonderful 4th! gratian
    1 Jul, 05:35 AM Reply Like
  • Gratian
    , contributor
    Comments (3258) | Send Message
     
    Author’s reply » Week 7/12/2014 Update

     

    Hope all enjoyed the 4th!

     

    As for our Mortgage ATM we should be in boring mode for an extended period of time, dollar cost averaging into our no load, no transaction fee high yield bond fund.

     

    So, for the pre-retirement generation you want to keep contributing up to the company match in your 401k, keep contributing to your ROTH IRA for your retirement paycheck, and use a taxable account to create your current additional paycheck.

     

    An additional ideal is to also buy at least one (1) I-Bond at treasurydirect.gov each month for an additional bucket for your emergency cash.

     

    Okay, let's look at this weeks numbers.

     

    Account Activity:
    Current Cash Balance = $4.86

     

    7/08/14, BUY - USHYX 8.869 SHARES @ $9.02, -$65.00
    7/07/14, Cash Contribution = $62.50
    7/02/14, BUY - USHYX 8.869 SHARES @ $9.02, -$80.00
    6/30/14, Cash Contribution = $62.50

     

    Total July Dividends = $0.00

     

    Total Market Value: $6,428.82
    Total Contributions: $125.00
    Total Reinvestment: $0.00 (50% Rule)

     

    Portfolio Total 3 Month Return: +5.3%
    DJIA Total 3 Month Return: +4.8%

     

    YTD Performance (%)
    Portfolio: +7.9%
    DJIA: +2.2%

     

    The market is very frothy and this current bull run is getting very long. We will need to keep our eye on increasing the monthly paycheck and utilize any pullback for possible opportunities.

     

    That's all until next week :)

     

    Best wishes, Gratian
    12 Jul, 03:28 PM Reply Like
  • Gratian
    , contributor
    Comments (3258) | Send Message
     
    Author’s reply » Week 7/20/2014 Update

     

    Yes, we are still in boring mode for our Mortgage ATM and we will continue to, dollar cost averaging into our no load, no transaction fee high yield bond fund.

     

    Interesting that we had some appreciation over the last couple of weeks with our holdings, despite all the market jitters.

     

    Okay, let's look at this weeks numbers.

     

    Account Activity:
    Current Cash Balance = $10.69

     

    7/16/14, BUY - USHYX 7.214 SHARES @ $9.01, -$65.00
    7/15/14, Cash Dividend - ARCP = $8.33
    7/14/14, Cash Contribution = $62.50

     

    Total July Dividends = $8.33

     

    Total Market Value: $6,428.82
    Total Contributions: $187.50
    Total Reinvestment Reserve: $4.16 (50% Rule)

     

    Portfolio Total 3 Month Return: +5.9%
    DJIA Total 3 Month Return: +4.2%

     

    YTD Performance (%)
    Portfolio: +9.6%
    DJIA: +3.2%

     

    Results are very good for a small high yield portfolio, but as we know, the market can turn on a dime.

     

    That's all until next week :)

     

    Best wishes, Gratian
    20 Jul, 07:23 PM Reply Like
  • Gratian
    , contributor
    Comments (3258) | Send Message
     
    Author’s reply » Week 7/20/2014 Update

     

    This will be the last weekly comment when it comes to the Mortgage ATM. I will for now on provide a quarterly progress report.

     

    I think the results so far show just how easy it is to take a small amount of money and build wealth, along with a post retirement income stream.

     

    Okay, let's look at this weeks numbers.

     

    Account Activity:
    Current Cash Balance = $17.13

     

    07/31/2014, Qualified Dividend - ORC = $18.00
    07/30/2014, Cash Dividend - USHYX = $8.83
    07/29/2014, BUY - USHYX 8.371 SHARES @ $8.96,-$75.00
    07/28/2014, Cash Contribution = $62.50
    07/28/2014, Qualified Dividend - LTSPRA = $8.34
    07/24/2014, Cash Dividend - PSEC = $11.05
    07/22/2014, BUY - USHYX 6.944 SHARES @ $9.00,-$65.00
    07/21/2014, Cash Contribution = $62.50

     

    Transferred 27.28 to the Mortgage checking account and set aside 27.28 to reinvest as part of our "50% Rule".

     

    Total July Dividends = $54.56

     

    Total Market Value: $6,684.54
    Total Contributions: $250.00
    Total Reinvestment Reserve: $27.28 (50% Rule)

     

    Portfolio Total 3 Month Return: +5.52%
    DJIA Total 3 Month Return: -0.4%

     

    YTD Performance (%)
    Portfolio: +9.51%
    DJIA: -0.5%

     

    As you can see, the recent market weakness resulted in absolutely no impact to the performance of the portfolio.

     

    Results are still very good for a small high yield portfolio, but as we know, the market can turn on a dime.

     

    That's the last update until 3rd quarter, hopefully this project as provided a benefit to the new retail investor.

     

    Best wishes, Gratian
    3 Aug, 02:36 PM Reply Like
  • Miz Magic DiviDogs
    , contributor
    Comments (4323) | Send Message
     
    It's coming along nicely, isn't it? :)

     

    I don't have such a detailed breakdown on our taxable accounts (mine and my daughter's), but our income goes up each month by reinvesting. We both add to our portfolios when we get the chance, and it's just amazing how such a small amount can generate such nice returns!

     

    We've now started an account for my grandson who just turned 21 and is going to college. PSEC and ORC are also his starting stocks. Hard to beat a ~14% yield to kick-start some income coming in.

     

    Miz
    3 Aug, 03:20 PM Reply Like
  • Gratian
    , contributor
    Comments (3258) | Send Message
     
    Author’s reply » Miz,

     

    I agree, No reason for the young folks to wait until retirement to start producing an income stream.

     

    I use the 50% rule for my in-laws accounts and they are now believers in how there retirement income and wealth keep increasing.

     

    Best wishes, gratian
    4 Aug, 05:40 AM Reply Like
  • Gratian
    , contributor
    Comments (3258) | Send Message
     
    Author’s reply » folks,

     

    fyi,

     

    I sold out of $ORC today across 3 accounts, it was a good ride with the monthly dividends, but could not leave that amount of unrecognized gains on the table.

     

    After the stock breaks out of the wedge pattern, I may swing back in later on down the road.

     

    Also sold PSEC today, wish I could brag about it, but at least was a positive return overall.

     

    Hope everyone has a great weekend! gratian
    12 Sep, 03:56 PM Reply Like
Full index of posts »
Latest Followers

StockTalks

More »

Latest Comments


Instablogs are Seeking Alpha's free blogging platform customized for finance, with instant set up and exposure to millions of readers interested in the financial markets. Publish your own instablog in minutes.