A Tale of Two Investment Strategies: 5/31/2018 through 5/31/2022 Numbers

The Market Value Growth Strategy is an unmanaged, hypothetical, equity only, portfolio comprised of the three major stock market averages: DJIA, S & P 500, and NASDAQ. No fees or withdrawals were taken from the accounts. The total market value of these portfolios on May 31st 2018 was precisely $39,504,000 reflecting the closing values of the three indices on that date.

The average account size of the 60 portfolios in the study was $658,400 with an average dividend yield of less than 2% from a portfolio of roughly 3200 independent companies.

Over the four-year period through May 31, 2022, the market value of the 60 MV Growth Strategy portfolios rose to $49,285,000 or roughly 6.38% per year. The income produced by the portfolios moved even further below 2%.

The Dividend Income & Working Capital Growth Strategy is comprised of real life, actively managed portfolios with less than 30% dividend producing equities, less than 5% tax free income securities, and 65% taxable income producing securities. The total invested working capital in this strategy was $26,140,300 on 5/31/2018, and $2.430 million in fees and distributions (nearly 1.77% per year) were deducted during the four years of the study. Roughly $13 million in distribution and realized capital gain income (10.8% annually) was added to these portfolios during the same timeframe.

The average account size of the 60 portfolios in the study was $440,000 with an average dividend yield of over 8% from a portfolio of roughly 250 professionally managed, widely diversified, Closed End Fund portfolios.

Over the four-year period through May 31, 2022, the total Working Capital of the 60 portfolios rose to $34,244,000 or roughly 7.75% per year (after paying out $2.4 million in fees and withdrawals to portfolio owners). The income produced through May, 2022 ($1,019,499 and one third of the total for all managed portfolios) was 53% higher than that produced four years earlier ($665,463) or an annualized growth rate of 13.3%... again in spite of withdrawals totaling $2.4 million.

Observations To Mull Over

· With only 30% invested in the stock market, the DI + WC Growth Strategy produced more annual growth in capital than the MV Growth Strategy produced growth in Market Value, even after distributing $2.4 million in capital to portfolio owners. So far in June, the MV Growth portfolios have lost an additional $4.68 million in MV, (- 9.5%) while DI + WC Growth portfolios have added another month's net distribution capital.

· The 7.75% annual WC Growth in the DI + WC Growth Strategy was after all fees and distributions to investors. What if the MV Growth Strategy had to pay out even the 4% per year that most financial professionals feel is what retirees should be planning on, presumably including any fees for services? Well, that would have cut the market value growth per year to just 2.38%.... and if there had been emergency expenses?

· The total $108 million currently invested using the DI + WC Growth Strategy includes more than $3.7 million in new Working Capital produced through May 2022 while the MV Growth Strategy has lost roughly 12.1 million in market value.

· 100% of the assets in the DI + WC Growth Strategy are invested in securities with intrinsically less "Financial Risk" than those in the MV Growth Strategy, and with slightly less "Market Risk" as well.

What's in your wallet?

Steve Selengut
Author of: "The Brainwashing of the American Investor"
Join the private Facebook group: "CEFs For Equity Trading and Retirement Income".


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