8% Current Income And Capital Growth From This High-Yield, Sustainable Capital Portfolio

Published Mon, 02 Jul 2018 01:21:37 -0400 on Seeking Alpha

Sustainable 8% Income from Closed-End Funds At the end of September 2015, I began a model income portfolio built on closed-end funds (CEFs). At the time, there were many fewer Seeking Alpha contributors writing on the subject of CEFs than we have today. And few of these were writing with an emphasis on income. When started writing about high-yielding CEFs for current income I was lectured on the fate that awaited those who chased yield and admonished for advocating reckless investments that would inevitably lead to ruin for any retirees who followed my lead. The assumption - rarely, if ever, questioned or tested - was that anything yielding 8% or more was a fool's game.
Evidence from backtests were dismissed as cherry-picking winners in hindsight, and could not to be taken as predictive of future performance. Admittedly, these are hard arguments to dismiss, so I decided to run a bit of an experiment. I built a model portfolio of CEFs designed to provide current income at 8% of portfolio value, while sustaining a capital base. This would be one that readers and I could follow in real time through my periodic updates. I began the exercise with equal-weighted allocations to a diversified set of fifteen CEFs with a portfolio value of $100,000.
I have updated the portfolio quarterly since. This update is for the portfolio's eleventh quarter. It will turn three years old at the end of the current quarter.
Each quarter, I've changed the holdings slightly. In trying to... Read more