Looking for good news in today's markets is like searching for the proverbial needle in a haystack. Needless to say, practically all investment grade equities and nearly all closed end funds that specialize in providing regular recurring monthly income have been reduced in market value by this prolonged correction. The quake has spread in all directions from its financial epicenter, and the mounting doom and gloom has taken its toll on even the most rational investment decision makers. Try to keep in mind that the purpose of income investing is the income that your portfolio produces not an increase in the securities' market values---
So here's the good news (and for anyone with a 40% or higher income asset allocation, or an income portfolio being used for living expenses), it really is very good news. Base income levels, from the beginning of the stock market correction in June '07 until mid-July '08, have barely changed at all. In fact, they have probably risen in properly asset allocated portfolios. I have examined the regular recurring monthly income distributed by 56 taxable income CEFs and 61 tax-free income CEFs, and the conclusions are pretty remarkable.
In spite of the fact that the vast majority of my favorite monthly income producers are lower in market value than I would like, the amount of income they are distributing to shareholders has not moved lower meaningfully--- even though the Federal Reserve has reduced interest rates by approximately 60% during the past twelve months. Here are the numbers: (1) 48% of the taxable-income CEFs are distributing precisely the same amount per share as they did a year ago. Fourteen issues have increased their payouts and fifteen have reduced them.
The net result is a decrease of just fourteen cents (2.5% of the total monthly payout). The average current yield on the portfolio, as of mid July '07, is 9.86% without considering any capital gains distributions. Additionally, the group is selling at market prices that reflect an average discount of nearly 11% from NAV. Is that special or what? The bonds, preferred stocks, government securities are priced 11% below their current market values.
(2) The numbers are similar with regard to the 61 tax-free income CEFs: 46% have not altered their payout over the past twelve months; eighteen have reduced their payout slightly, and 15 have increased the monthly dole. The net difference for the group over the past year is less than one cent, or a percentage change of two-tenths of one percent. Remarkable. This group is selling at an average discount from NAV of 9.1% and has a current tax-free yield of 5.51%.
(3) Of 117 individual issues, about half have produced stable income. The others have accounted for a total payout reduction of less than 15 cents--- a measly 1.7%. Why is this amount of little consequence? Two reasons really.
First of all, a properly asset-allocated income portfolio does not disburse all of the base income it receives, so there is income available to reinvest in more shares of income producing securities. This process assures a growing cash flow to calm your fear of rising prices. The other reason is a bit more hypothetical. The Fed has lowered rates significantly, a process that normally produces higher prices for income securities. Eventually, those lower interest rates (even if global pressures convince politicians to take back some of the reductions) should produce higher prices (i.e., profit taking opportunities) in these securities.
Admittedly, even if your asset allocation has been fine tuned for years, lower portfolio market values in this area make stock market valuation shrinkage feel even worse. But the value of stable cash flow becomes painfully clear for investors who misguidedly depend on capital gains for their spending money. Properly asset allocated portfolios contain enough base income generators to pay the bills. The purpose of capital gains is to produce proportionately more base income generators.
The purpose of this email is simply to bring some needed sunlight into an investment environment that is far gloomier than I think it needs to be. If you want the details, you'll have to request them personally.
If you love fashion and always read the fashion pages in a magazine, if you have your personal style and try to keep up with fashion’s latest trends, in other words, if you are a typical young woman, you are probably looking forward to the next trip to the shopping mall with your girlfriends. However, when you enthusiastically inform your boyfriend or husband about your plans (“Honey, I’m going shopping with the girls tomorrow"), you notice that he doesn’t share your enthusiasm at all. Though he doesn’t say it, you can almost hear what he’s thinking “Oh great, she’s going to waste the entire day again wandering about some shops and probably end up buying some extravagant and extremely expensive womens clothing". That is absolutely unfair, you are thinking. Why can’t men understand us? We understand when they feel like spending the whole evening in front of the TV watching football or going out with their mates for a beer, instead of staying with us. Then why can’t he be supportive when I show him the terrific new fashion clothing I have just bought? And why does he think shopping (for clothes) is a waste of time?
The answers to these questions remain unknown; it’s probably something about the inexorable differences between males and females. However, in order to avoid future couple fights, we suggest you to try online shopping for womens clothing. The advantages are obvious: you won’t waste precious time driving to the mall and back and your husband/boyfriend won’t lose his temper about your spending the entire day at the shopping mall anymore. You can invite your girlfriends over for a coffee and browse through countless online shops. Moreover, you will get to make important savings, as the online stores offer you fashion clothing at incredible discounts.
Although you love going shopping at the mall, you must admit that there are some inconveniences. The traffic, the crowd, the frustration of finding a wonderful piece of womens clothing that unfortunately doesn’t fit you (because, as usually, they don’t have your size)…You can now forget about all those. With the online shopping mall, all you have to do is sit comfortably in front of your computer and check the offers No more stress, no more worrying that they have sold that beautiful skirt that you have seen last week. Once you have found something that you like, you can order it with a simple click. In a very short time, the fashion clothing will be delivered straight at your door (and you can be sure that it will be in your exact size).
When you are shopping, it is easy to spend a lot more than you have originally planned, just because you couldn’t resist the temptation. Be honest, how many times have you bought a piece of womens clothing that was “a real bargain", only to discover later that it doesn’t really fit you or it isn’t exactly your style? We all have clothes that we have never worn, either because we didn’t like them anymore after we have bought them, either because we have never found the right occasion to wear them. In other words, we have spent our money on something that has ended up thrown at the back of the closet. Another common situation is to buy an expensive outfit, than discover that we could have got it cheaper in another shop. With the online shopping mall, it is easier to compare products and prices and avoid getting fooled. Even if you don’t buy anything, you can just see what’s new and check the latest trends of fashion clothing. This way, when you decide to buy something, you will be sure that it is trendy and it fits your style.
Both Steve Selengut & Ron Mark are contributors for EditorialToday. The above articles have been edited for relevancy and timeliness. All write-ups, reviews, tips and guides published by EditorialToday.com and its partners or affiliates are for informational purposes only. They should not be used for any legal or any other type of advice. We do not endorse any author, contributor, writer or article posted by our team.
Ron Mark has sinced written about articles on various topics from Finances, Hotels and Hostels and Internet Marketing. There is nothing that women like more than shopping for . Men argue that women waste too much time and money in shopping malls. Now, thanks to the online shop. Ron Mark's top article generates over 110000 views. to your Favourites.