Anchoring an account with yield and money management

[eaglefeather]

Hello,

Lately I have realized how important having some yield in a portfolio to offset losses. With a little money management, the yield can really offset risk, for example, if your portfolio earns 1K a month in yield, and you use that money to purchase OTM butterflies, your risk is essentially only what you have in debt instruments or bonds, which is conservative? What are your thoughts?

The second part of this post is regarding obtaining the capital required for that kind of yield (~.5 percent a month which let's say is around 200K in capital). Are there traders willing to share how they might have procured that kind of capital, through what means, and was it through personal credit or as a business entity?

 

[Visaria]

To yield 1k a month off 200k, you need 6% yield pa. Which conservative bonds have you found which yields this?

 

[eaglefeather]

True, but I don't want to get off in the weeds discussing bond ratings, convertibles, and other debt instruments, what might be conservative for some may not be for others that is understood, but let's say you could make around 1/2 a percent yield per month for exercise.

 

[Visaria]

Let's not since it is unrealistic.

 

[sss12]

Let's not since it is unrealistic.

While you can set up a fixed income/yield portfolio with a combination of HY, REITS, MLP's, etc to generate 6% cash flow it would have a much higher risk profile than say a 5 yr laddered AAA corp bond port. (I think that was Visaria's point).

So even though the FI has risk, using the concept of using the cash flow to then invest in risk premium has always been appealing to me.

I know it is not new or novel, can anyone suggest any good reading/resources on this topic . Thanks

 

[MrScalper]

While you can set up a fixed income/yield portfolio with a combination of HY, REITS, MLP's, etc to generate 6% cash flow it would have a much higher risk profile than say a 5 yr laddered AAA corp bond port. (I think that was Visaria's point).

So even though the FI has risk, using the concept of using the cash flow to then invest in risk premium has always been appealing to me.

I know it is not new or novel, can anyone suggest any good reading/resources on this topic . Thanks

They all tell you that you must..

"speculate to accumulate"

but..of course it is the exact opposite..in that you really must..

"accumulate to speculate"

Fixed income returns..are..needless to say..not great..with senior corporate bonds being the best bet..but this particular market is not easily accessible to the retail investor..it takes a good deal of work if you do not know people who are already doing same!

I was offered a 9% coupon junior bond recently..a major bank..no maturity date..min investment €100k..I asked the person to send me on the Bloomberg chart..which showed the bond had not traded in over 1 year!

I emailed the person back and said..

"No Thank You"

 

[ironchef]

The second part of this post is regarding obtaining the capital required for that kind of yield (~.5 percent a month which let's say is around 200K in capital). Are there traders willing to share how they might have procured that kind of capital, through what means, and was it through personal credit or as a business entity?

It would be difficult to get that type of yield with short term bonds. Going long bonds with that type of yield carries similar risks as stocks when interest rate gyrates.

Have you considered a blend of bonds, dogs of the DOW (~4% yield) and MLP (ETP yields 12%) to get a 6% payout? However, I have not studied the risks of such a portfolio.

Thank you for your post.

Best wishes.

 

[ironchef]

They all tell you that you must..

"speculate to accumulate"

but..of course it is the exact opposite..in that you really must..

"accumulate to speculate"

Fixed income returns..are..needless to say..not great..with senior corporate bonds being the best bet..but this particular market is not easily accessible to the retail investor..it takes a good deal of work if you do not know people who are already doing same!

I was offered a 9% coupon junior bond recently..a major bank..no maturity date..min investment €100k..I asked the person to send me on the Bloomberg chart..which showed the bond had not traded in over 1 year!

I emailed the person back and said..

"No Thank You"

To "accumulate to speculate", you need time. Unfortunately, those that have time only want to "speculate to accumulate".

When they finally understand "accumulate to speculate" they run out of time.

Well, that is life.

 

[sss12]

They all tell you that you must..

"speculate to accumulate"

but..of course it is the exact opposite..in that you really must..

"accumulate to speculate"

Fixed income returns..are..needless to say..not great..with senior corporate bonds being the best bet..but this particular market is not easily accessible to the retail investor..it takes a good deal of work if you do not know people who are already doing same!

I was offered a 9% coupon junior bond recently..a major bank..no maturity date..min investment €100k..I asked the person to send me on the Bloomberg chart..which showed the bond had not traded in over 1 year!

I emailed the person back and said..

"No Thank You"

You need better advice, not to hard to put together the portfolio I mentioned in post #5. A diversified yield oriented portfolio does have to equate with speculation.

 

[MrScalper]

You need better advice, not to hard to put together the portfolio I mentioned in post #5. A diversified yield oriented portfolio does have to equate with speculation.

I only take advice from those who can show exactly what they are talking about..any other way would be just silly and childish!