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On March 23, 2018, the S&P 500 (at $ 2,588.26) lost about 10% from its all-time high of $ 2,872.87 on January 26, 2018, and about 3.2% over the year, presumably in anticipation of an impending trade war .

In addition, rate-sensitive stocks traded near the 52-week lows as bond and other fixed income speculators ran their inventory in anticipation of at least three rate hikes in 2018.

Obviously, a market scenario like this is challenging for:

• Large market participants (institutional investors) whose bond holdings are shrinking in price.

• Speculators with far too high P / E ratios and low or no dividend stocks.

• Income-oriented investors (retirees and “Soontobes”) who have positions in illiquid individual fixed income securities.

• 401,000 savings account holders whose pooled investment portfolios are conceptually far too heavily invested in stocks.

But it’s a perfect storm of opportunity for Market Cycle Investment Management (MCIM) portfolios. The MCIM process focuses only on fundamentally solid, S & P B + or better rated stocks of profitable, dividend paying companies (investment grade value stocks). No individual stocks are bought until they are 20% below their 52-week highs.

MCIM portfolios are diversified in a number of ways, and each security pays either dividends or interest. New issues, NASDAQ companies, and mutual funds have no place in MCIM portfolios, which also have strict profit-taking that avoids the pain of losing big profits during corrections. In addition, the “cost-based” asset allocation avoids the need to “realign” the portfolio while ensuring annual income growth with asset allocation of 40% or more to higher income.

As markets climb to record highs, the lack of individual equity investment opportunities is alleviated through the use of closed-end equity funds (CEFs). These are managed, classically diversified portfolios that can be traded in “real time”, cover most market sectors and at the same time deliver significantly above-average income (based on expenditure).

The Bucket Income Purpose uses well-diversified Income CEFs (both taxable and exempt) to secure above average income from all types of generally illiquid securities … securities that (in the form of CEFs) magically complete liquid form will become available.

How have IGVS stocks and CEFs fared in the three major meltdowns of our lives?

• In 1987, IGVS stocks were the first to rebound, and there were no corporate failures or dividend cuts; At the time, CEFs were few and far between and were not a significant portfolio holdings, but individual rate-sensitive securities rebounded as interest rates were lowered.

• In 1999, IGVS stocks and most CEFs did not “bubble” alongside NASDAQ and rebounded sharply during the flight to quality that followed the dot-com disaster. “No NASDAQ, no new issues, no investment funds” was a successful credo back then, as it should be with the next significant correction.

• In 2008 it was all fueled up and two or three IGVS financial services companies were crushed in the government witch hunt. Overall, stocks have seen few dividend cuts as IGVS companies recovered from the trough slightly faster than the S&P 500 through 2014. However, earnings CEFs outperformed the overall stock market while theirs was theirs from 2007 to late 2012 Dividends until around 2016 when CEF tax-free yields began to decline.

So while some managed portfolios may have inherent quality, diversification, and return issues during corrections, MCIM portfolios offer new investment opportunities. While some investment portfolios need to use capital to pay retirees a monthly income, the vast majority of MCIM portfolios have excess income that is used for capital growth in any market scenario.

As of this writing, there are four types of investment opportunities:

• The number of IGVS stocks, falling 20% ​​below their 52-week high, is on the rise.

• There are roughly forty CEFs that are primarily equity based and represent a variety of market sectors with ongoing returns of between 7% and 9% after all internal fees and expenses.

• There are no fewer than sixty-one taxable income CEFs representing a variety of types of securities, with current returns ranging from 7.5% to 9.5% after all internal fees and expenses.

• There are at least thirty-one federally tax-exempt CEFs paying between 6% and 6.6% after all internal fees and expenses.

For the long-term health of your portfolio, make sure you use it … this time. It has been ten years since the last sharp market correction, and it just makes sense to use an investment vehicle that provides the fuel needed to take positions at lower prices. The clock is ticking.

The “add at lower prices” approach is particularly effective with CEFs where each addition:

• Reduces your cost base and accelerates the return of profit-taking opportunities.

• Increases your dividend yield on the security and.

• Increase your annual portfolio income.

What’s the old scout motto? Law…

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Source by Steve Selengut