High Yield Strategy Fails Again

Published Tue, 17 Jul 2018 12:46:40 -0400 on Seeking Alpha

Background (Skip this part if you are already up to date with my series of articles)
I have been writing a series of articles analyzing the performance of high yield investment portfolios composed primarily of mREITs, BDCs, and CEFs. I started the project after reading articles about high yield investing here on Seeking Alpha which made it sound like a way for a retiree to have twice as much money to safely spend in retirement compared to what he or she would be able to realize through more conventional investment strategies.
Study #1 I started out in 2015 by constructing model portfolios composed of high yielding securities suggested by WmHilger and High Yield Investor. That first study was made on the model of a retiree who invested his nest egg in the suggested high yield portfolios with $500,000, withdrawing a portion for spending every year and reinvesting the rest of the dividends to grow the portfolio over time. I "funded" two index funds as of July 1, 2010, with the same initial payment and followed the same technique there, except instead of reinvesting extra dividends, I sold off some of the funds each year to meet the spending schedule (because the dividends were less than the amount of the withdrawal.) The withdrawals were 9% of the initial model portfolios - the range that was then suggested was attainable through high yield - plus annual COLA adjustments. I wrote it up in a series of articles, including Can High Yield Investment Portfolios Support... Read more