Last October I posted an article describing my then current portfolio and suggested that change was in the wind. At the time it was earning 5.75%, and producing enough supplemental income for us to meet our needs and still save a little. See "My retirement-portfolio-at-5_75-percent-income" to compare with this present information.
Because the Fed has now backed off its earlier stance of intending to raise interest rates even more, the interest-sensitive portion of my portfolio has returned some of the recent losses. Combined with some growth in blue chips, I'm back to the same overall point that I was last October 12. Because bonds and preferreds are still lower than the blue chips, my yield is currently 6.1%; so for the moment I'm keeping up with inflation. A portion of my portfolio is in an IRA, and I'm moving up the ladder on the IRS Required Minimum Distribution table, (which increases as you get older) but I'm still earning more than I have to take out. If you are unfamiliar with this aspect of investing for over 70-and-a-half-year-olds, see my article "A retired investors portfolio for withdrawing annual RMD without withdrawing principal"
Do not consider this listing as a suggestion for buying anything on it. Most of these were purchased years ago and are now in various places in their cycles. For an income investor stocks rarely need to be sold, and stocks showing a loss today may be a strong mover in a different environment later on. A case in point: when I bought Artisan Partners (APAM) it had a nice run-up afterwards. You could argue that it should have been sold, but then I would need to replace $864 in income with that capital and pay capital gains on the profit.
|CFRPRA||CULLEN FROST PF||Banks||$941||$25.53||$17,871||$17,616||5.26|
|GDVPRG||GABELLI DIVI PF||Fund||$394||$24.86||$7,458||$7,601||5.27|
|IRM||IRON MTN REIT||Real Est||$129||$36.68||$3,668||$3,473||6.63|
|MAIN||MAIN ST CAP||Finance||$1,734||$37.32||$22,392||$19,112||6.24|
|NEEPRI||NEXTERA ENERGY PF||Bond||$512||$24.33||$9,733||$10,080||5.24|
|NEEPRK||NEXTERA ENERGY PF||Bond||$394||$24.55||$7,365||$7,507||5.34|
|NLY||ANNALY CAP REIT||Finance||$1,080||$10.36||$9,324||$9,840||11.49|
|PSAPRE||PUBLIC STORAGE PF||Real Est||$490||$22.25||$8,900||$9,654||5.50|
|RDS.A||ROY DUTCH SHELL||Energy||$1,410||$63.70||$23,891||$22,130||5.90|
|SPRXX||FIDELITY MONEY MKT||Fund||$1.00||$7,929||$7,900||2.04|
|STAG||STAG INDUST REIT||Real Est||$715||$27.66||$13,830||$11,352||5.13|
|TOOPRB||TEEKAY OFFSH PF||Energy||$1,063||$18.85||$9,425||$12,504||11.08|
I try to adhere to several rules in maintaining this portfolio. At first, I thought there should be about 40 issues, but I have come to realize that this is more than necessary and is too many to handle without losing track of what is going on. I have reduced it to the current 31 (including cash), and I may reduce it a bit more. Some portfolio experts seem to like 20 different stocks, but I'm still okay with about 30. With maybe two or three exceptions each stock should be no more than 5% of the total portfolio. A couple have done well and are now above 6%, but I'm reluctant to sell any portion of those. Also, I try to maintain a balance of each investment category and industry. Bonds, preferreds, REITs, and BDCs make up a majority of issues. But there are a number of blue chip stocks that pay a decent dividend, and my intention is to increase the percentage of these holdings in the portfolio. Currently there are more REITs - 22.5% - than should be present; I'm more comfortable with 15%. Bonds add 11%, BDC are 10%. Preferred stocks are 17%, these are well-diversified among several industries, but still are very interest-sensitive and they will follow that curve more than their industry.
Another rule I follow is to invest in stocks that are paying at least 3.5%. A couple of mine have gone below that point, but my initial investment was above a 3.5% yield.
One of the issues that I currently face is some of the stocks are in the red by a considerable margin. I have been thinking about Ford especially. One market theory says you should take your losses and invest what is left into a better stock - but when the stock is paying 6.9% is this really the thing to do? Autos are cyclical, and Ford has just come out with a couple of vehicles that will help their bottom line, so I may just wait it out and collect $420 a year for doing so. Artisan Partners is also in the red, I'm regretting not selling it when it was much higher. But selling stock that earns a part of your income is a mixed blessing because taxes must be paid and you must find an equal or better replacement for the $864 income from the approximately $10,000 capital. Some authors have suggested that AT&T now carries greater risk because it has more debt than prudent. But again, it produces a good dividend from a blue chip stock that has been in my portfolio from the beginning. It continues to provide a good income and I believe that the dividend is still safe because its cash flow is still very high.
So, what is going to happen this year? Last Fall I said the bear is sniffing at the door, and in December I really thought I was correct, but a lot of volatility has quietly faded lately. Bear markets can be like that, but usually bear markets are very volatile. So, there may be some life in the bull yet. Bears have always been scary and depressing for investors and certainly the last one was no exception; it doesn't look like we're anywhere near that phase now. My total portfolio dipped into the red a month ago, but it currently is on the way back. So I think we did see a "correction," although some parts of the market did actually dip into bear territory.
The safest thing for a retired investor to do (and that is what I did) during scary drops in the market is to go away and ignore what is happening. I don't believe anyone can consistently time the market, so I don't pay anyone for that kind of advice, and my broker has one of the best groups of research tools available. Unless something drastic happens to one of your stocks, the best advice in my opinion is to hold on. I did this in 2008, but that was a tough one, and many investors couldn't stand the strain and that brought the market even lower. Remember, the market has always come back and gone ahead. And, if you were able to buy in December you are probably ahead now. I still have some cash, but I'm going to wait and see, even though advisors suggest investing an equal portion of your cash at regular intervals despite where the market is moving.
Disclosure: I am/we are long ALL LISTED SECURITIES. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.