I'm in a writing mood today, mainly because I'm putting off vacuuming the house before I return to work tomorrow. I also have the main dog barking randomly to annoy me and scare off potential intruders that live twenty miles away and the back up dog is following me around and trying to stand one foot in front of my knees whenever possible. He wants food and to be taken out. He can wait. It's 23 degrees out and windy and it's not my fault he didn't poo yesterday. He also knows that he gets fed at 8pm, not before.
I talked to my dad a bit over the last week. As far as I was aware, he was the only person to become well off in my family. He is 83 (I think) and grew up in the great depression (a good bit older than my mother - explains my somewhat austere upbringing compared to my friends who had boomer parents). He avoided being killed in Korea (drafted after unsuccessfully arguing that he shouldn't be because he was in grad school) and ended up being a professor. He's written some text books along the way.
I did not know that he had an uncle who worked at Texaco back in the day and accumulated a good amount of the stock. He died - stock went to his wife. The wife died sometime in the early 80's and left my dad (and apparently many other nieces/nephews/kids) 1000 shares.
Dad sold it all (I almost spit when he told me). Dad then told me he put the proceeds in a whole life insurance policy that's been growing between 4-6% for the last thirty years or so.
Dad also told me that between his pension, social security, and his IRA, that he gets about $30,000 more a year than he can spend. Because Mom's a good bit younger than Dad, he took a reduced pension so that she could receive it after he dies.
And that he didn't get interested in investing until he was in his 30's.
And he did a good bit of this just going with index funds in his IRA.
So maybe I've got some hope. Might take a minute, but I'll get there.
So how have I done over the last year? I'm not sure yet. I'll need the end of the year tax returns first.
What I can say I've done is that I started contributing to my 401k last May. I just hit the fully vested mark and a 50% match is hard to pass up.
I continue to put money into my taxable account once a month. I focus on preferreds and cefs that currently have at least an 8% yield. That minimum will have to be changed higher when interest rates rise.
For the taxable account, I'm not worried too much about taxes right now. I don't have enough or make enough to where it makes a noticable difference. Hopefully that will change over time and I too can be someone who bitches about taxes!
As an estimate, about 25% of my gross income goes towards investments. I've run a compound interest calculator many times, and it's always at the 25 year mark that you start getting the accelerated crazy gains. 35 years is much better and so on...
So why 25% of gross income? A couple of years ago I was reading headlines that 10% wasn't enough and that it should be 15% for retirement. Considering that I'm 36 and not 26, I'm opting for higher.
So why focus on high yield? I have read some compelling arguments that total return is all that matters. I agree except for one thing - a dollar now has more purchasing power than a dollar down the road. I want my money quickly and will invest it in something that will make more money quickly.
This is a joke for people older than me, but when I first started driving I routinely bought gas for less than 75 cents a gallon. I was appalled when one of my truck driving mentors bought his own truck to drive in 2000 and diesel immediately jumped to $2/gallon (nice 100% increase - do people remember that?). I am only four years older than Woman and she didn't start driving til 2005, but she has not nor will ever see gas that cheap. Pretty sad when a 32 year old is asking the 36 year old what it was like back in the day...
Anywho, here's what I currently own in the taxable account:
ARR-B: This one's been a bum for me. My mistake was buying at about par value early last year. If I sold it today, I would have a 20% loss or thereabouts. Lesson learned is to buy higher quality preferreds at bigger discounts to par. Good news is that I still get my dividend as long as they can pay the common dividend. Have to keep an eye on it though...
RSO-B: Can't complain. Again, initially bought around par value and has dropped since. Bought more over the last month. Owns real real estate and not just mortgages.
MPA: Catching falling knives. Seems to have stabilized somewhat. I happen to like Pennsylvania (probably because half of my family is from there). In retrospect, would not have bought it then, but would now.
NRF-D: Want more. My second pick for today, but managed to buy some OXLCO.
CHW: Big discount. Also own a much bigger chunk in my Roth. Would buy more, but already own as much as I want.
ETB: Bought into last month. At a bigger discount to NAV than when I bought it, but the NAV creeps up while the market price drops.
JDD: Weird diversified fund. NAV has been steady for the year, even though is mostly bonds. A good chunk of which are convertibles. Have a small amount and might be interested in more a couple of months out.
JLA: Another option fund. Kind of like ETB, except even more defensive. Have small amount - wish had bought more. But then I wouldn't have JDD.
LCM: This fund makes me laugh! (And I just realized by using that word that it brings back a memory from grade school of how weird it's spelled. Damn French. Then again most of the French people I have met have been quite nice.) So why? Because it's not listed on cefconnect as a convertible fund. Which 80% of its holdings are. Again: NAV creeping up / market price flatlining. Close to a 14% discount. If I was a rich dude, would be buying much more of this.
RAS-A: Good stuff. Good company. Like RSO and NRF, it's considered a mreit even though it really isn't. Another one I'll consider for my next investment paycheck.
AGC: Another convertible fund. Wouldn't buy now as the distribution is not over 8%, but am happy to drip it at a discount to NAV. Monthly pay. I bought some a bit over a year ago and sold it for a decent profit and kind of wish I just held onto it all along.
BPOPP: My favorite preferred. Own a big chunk % wise, mostly in the Roth account, but some in the taxable. Puerto Rico has problems. This is the biggest bank there. The biggest risk is if they'll go bankrupt. If not, I believe this will be the first preferred they call as it has the highest rate.
They have stated on many a conference call that they want to exit TARP and how they have been selling bad loans off. I bought all of my positions below par, so I will have a decent capital gain if they call this one. If they go boo-boo, well, I have to deal with it. In the meantime I'm getting monthly dividends that are compounded into other investments. Right now, the market yield is about 9%. Not bad for the Roth.
BUI: Another option fund, but with a bent towards utilities and infrastructure and telecom. Still at a big discount and may think about this again before the next ex-date in Feb.
OFG-B: See BPOP above, another PR bank. This one pays a dividend on the common and the preferreds tend to run a bit higher in price. Managed to get some with 8% yield, but it's risen in price since then. More interest rate panic and I'd be willing to buy more.
OXLCO: Callable in 2016. Will be redeemed in 2023. Managed to pick up some with 8% yield. Pays monthly. Oxlc is a CEF and just raised their distribution in Nov. Good enough for me.
I think that's everything I own in the taxable account? If not, then screw it. I put in limit orders for cefs for a 10% gain as I figure I can find another one to buy with a similar distribution and performance characteristics. Preferreds I try to buy below par and will sell at par as long as I have something else to buy to replace them.
Anywho, hope folks have a good year!