Will REITs Continue to Outperform?

VNQ and BRT have performed very well for me this year? Will they continue to?

Simon Properties (SPG) has not performed on the other hand. I think their woes are overblown as weakness in the retail space, leading to empty storefronts, is a short term challenge as other industries will move in and utilize the spaces (gyms, call centers, data storage, etc).

Is the risk worth it?

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Up 20% on U.S. Real Estate

The MIP is up 20% in its Real Estate holdings this year, largely due to the trade-war hedge that U.S. Real Estate provides. VNQ has had a good year thus far, and although mREIT interest spreads have contracted with the narrowing 2 year to 10 year spreads, dividend income from REM and CIM have helped fund additional purchases in other areas. The dividend cash flow has enabled additional purchases in Apple (AAPL) and Southwest Airlines (LUV).

The big question here is should I take the gains off of the table in real estate and redistribute that capital to better potential prospects?

I will be updating the MIP table soon.

SPDRs High Yield (JNK) Out – See What’s Now In

The MIP portfolio for over the past couple of years (well, a portfolio that was a precursor to the MIP) held the SPDRs High Yield ETF (JNK) for its over 5% yield. As fears of increasing rates continued to mount, I sold out of the position. My reason was I could swap out of that position and expand my positions into other existing positions, such as the Eaton Vance Buy-Write Opportunities Fund (ETV), which has an approx. 8% yield and is arguably less volatility than the S&P 500. So I felt the swap of the two was a better position to be in since I am not particularly of the opinion that the MIP has to have bond exposure to be successful, at least not high yield exposure at this time.

I also used the opportunities to expand the portfolio into some beaten down areas as well. As an example I started positions into the International Select Dividend ETF (IDV), the International Developed Real Estate ETF (IFGL), and lastly the Chinese Real Estate ETF (TAO). Main attraction here was to diversify away from U.S. real estate and increase exposure to international dividend payers. At their beaten down price, I believe I can start building a position at attractive pricing.

The majority of the proceeds from the sale of JNK were allocated to ETV throughout the past couple of months, so the new positions are relatively small at this time. As the MIP continues to generate cash, I will continue increase my holdings where the most opportunity is within the portfolio. The concern I do still have at this time however is that the main underperforming position in the MIP is the energy MLP exposure, which is still down about 1% this year within the portfolio. Very concious to try and not throw good money after bad, however I still view my position here very favorable, especially with the lack of infrastructure needed to transport all of the shale crude that is getting produced. I hold MLPA in this space.

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Ray Dalio on Gold; Gold Income Options (GLD) or (GLDI)?

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I’m a huge fan of Ray Dalio and his philosphy. I loved his book (see below) and am eagerly awaiting his second one. I gobble up every video I can find from him explaining his views of the market, on work, and on life.

This video shows Ray talking about his views on gold and that there is always a place for gold in a portfolio as a diversifier. I don’t like gold one bit because I just don’t understand how it has any value to an investor, and I think the typical gold theory that it is a hedge against uncertainty is a bunch of hogwash. HOWEVER, I am not a market expert and thus am trying to figure out if there is a gold income vehicle that would be an important piece of the MIP Portfolio.

The mission of this portfolio is to generate the most income, maintain capital, and have the lowest risk through low correlations possible. With the high level of income being reinvested into the most opportunistic areas at the time, compounded returns are to surpass the market over time. This is what I want to develop here with this blog.

So the question here is can gold play a part. SPDRS Gold ETF (GLD) is the most popular gold ETF, but it doesn’t pay an income. I could hold it and sell covered calls on it, however I would prefer to find a fund that has the scale and expertise to optimize the strategy. So I’ve stumbled across the Credite Suisse X-Link Gold ETN (GLDI) which sells covered calls, however I can’t tell how well it actually correlates to gold price movements over time. So I don’t know if this is a plausible vehile either. If you look at a chart of this… it is ugly. Since inception it has decreased over 50%.

Does any one know of a closed-end fund (CEF) that may be an income producing vehicle on gold? Or should gold just be forgotten completely.

Comment below!

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What Happened to General Electric? GE

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When I first started investing I of course knew of the bellwether General Electric. Industrial conglomerate with a storied history and a great dividend yield. Alas, the market is unforgiving.  It was announced today that GE would be pulled out of the Dow Jones Industrial index and be replaced by Walgreens (WBA).

GE Stock Price   GE Replaced in the DOW   GE Cut by Finch

Viewing it’s stock chart you just see a straight slide down over the past year. Before GE cut it’s dividend earlier this year, GE was yielding an about 4.5% dividend yield. Since then, the stock has been about halved and is now yielding about 3.5%. It’s definitely been a rough ride, but what will the future hold?

The MIP Portfolio doesn’t aim to hold individual stocks, unless there is a compelling reason to do so. I have been considering over-weighting some of the better performers within an ETF in the MIP Portfolio, but have not begun to do so. Currently, the only single stock holding I have in this portfolio is Apple (AAPL). I’ve held this one as an income growth story, with the view dividends will continue to increase as Apple transforms from a hardware only company to a more diversified company with greater focus on services. Should this warrant holding it within the portfolio when the mission of the portfolio is to be the best income portfolio ever created? Let’s discuss (please comment below).

I write this post to just ponder whether GE is at a point to start adding to an income focused portfolio, however I think it best for the MIP Portfolio to stay away when there are much better opportunities to deploy capital elsewhere.

Would love to hear your thoughts!

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iShares 1 – 3 year Treasury Bond ETF (SHY)

Part of the mission of the MIP Portfolio is to perform in all markets by being diversified and having low correlations amongst the various holdings. Thanks to some feedback regarding the current portfolio from a helpful Facebooker, I am looking into adding the iShares 1 – 3 year Treasury Bond ETF (SHY) to the portfolio to maintain capital and generate income while interest rates are set to rise.

Now I have no idea how high they will rise, just that the general concensus is that interest rates will rise over time back to “normal” levels. Perhaps 3.5% – 4% on the 10 year is a normal range, or so I’ve heard from analysts on CNBC.

Since my portfolio is a yield portfolio, it will be sensitive to interest rate rises as higher yielding, safer investments (U.S. Treasuries) will garner higher demand. To protect against this I will look to start adding a position within SHY.

The wisdom I need from the crowd is to verify that SHY is the best way to protect an income focused portfolio against rising rates and what weighting this vehicle should receive. 10%, 15%, 20%+?

Please share your thoughts in the comment section. Refer here to see what is currently in the MIP Portfolio.


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