Client Portals

More Income From Your Portfolio3 min read

Sep 20, 2017 - John Osbon ( 4 mins to read)

John Osbon

Investments serve several core purposes. One of these is generating cash flow — income that can be reinvested or spent. Nice levels of income are available if you know where to look. As we rebalance to keep Osbon Capital portfolios risk constant, we are making allocation changes to increase cash flow. Here are some of the methods available to us.

More international, more yield

Reliable cash flow from investments outside the United States continues to exceed what’s available in the US. Many investors miss out on this due to “home bias.” Home bias is when we invest in things at home that we know, like Facebook or Apple, while steering away from less familiar foreign investments. The impact is less income for typical US investors. A 2% stock yield here is more likely to be a 3, 4 or 5% yield outside the US, even though the international company is comparable to the US company.  For instance, British Petroleum pays a higher dividend ExxonMobil. At Osbon Capital, we are shifting portfolios 3-5% more into international while stabilizing currency risk.

More real estate, more yield

Real estate yields more than bonds, all things being equal, because real estate has both a stock and bond part. The bond part is cash flow, and it too is rising now. The stock part of real estate is appreciation. You will see more diversified real estate in Osbon Capital portfolios after rebalancing.  For those who worry about rising rates: when the bond part of real estate falters the stock part tends to kick in. Appreciation can offset lower yields and rising interest rates.

Staying risk constant

Increasing the income profile of a portfolio can seem pretty simple — just choose investments with higher yields. But higher yields often come at the cost of higher risk. Chasing yield for its own sake can put your hard earned money in peril. Staying risk constant in today’s unpredictable world is one of our most pressing challenges. Portfolio changes must be balanced to keep risk constant. With Windham, our portfolio management program, we have the ability to accurately measure and monitor risk, and gauge the risk impact of any changes we have in mind. Max and I spent the weekend with the Windham program doing just that.

Steady as you go

Every week I hear from clients and professionals how nervous they are about “the world today,” “the market,” and other general and vague situations. While fears about the future are understandable, they are also nothing new. My own general view is that investors were deeply rattled and upset by last year’s campaign and election, and have stayed on high alert ever since. Events like hurricanes, bombs, missiles, lawsuits and insults add to the popular anxiety.

This environment of anxiety presents a real challenge for investors. Many feel they should be “doing something” with their portfolios to protect against an uncertain future. Paying more attention to income is a good place to start. From experience I have found that a steady hand and close attention to detail are essential; drastic changes in allocation or attempts to time the market rarely pay off and can severely backfire. Our portfolio changes in the fourth quarter are a result of the careful investment work we do at Osbon Capital. Call us if you would like to talk about it.


You might like this article on Buffet’s Bet on the Index because it also discusses portfolio structure.

WEEKLY INSIGHTS
delivered to your inbox

DISCLAIMER

This communication may include forward-looking statements. All statements other than statements of historical fact are forward-looking statements (including words such as “believe,” “estimate,” “anticipate,” “may,” “will,” “should,” and “expect”). Although we believe that the expectations reflected in such forward-looking statements are reasonable, we can give no assurance that such expectations will prove to be correct. Various factors could cause actual results or performance to differ materially from those discussed in such forward-looking statements.”

“Historical performance is not indicative of future results. The investment return will fluctuate with market conditions.

Past performance is not indicative of any specific investment or future results. Views regarding the economy, securities markets or other specialized areas, like all predictors of future events, cannot be guaranteed to be accurate and may result in economic loss to the investor.

Investment strategies, philosophies, allocations and holdings are subject to change without prior notice.

This communication is intended to provide general information only and should not be construed as an offer of specifically tailored individualized advice.

While the Adviser believes the outside data sources cited to be credible, it has not independently verified the correctness of any of their inputs or calculations and, therefore, does not warranty the accuracy of any third-party sources or information.

Adviser does not endorse the statements, services or performance of any third-party vendor.

Unless stated otherwise, any mention of specific securities or investments is for hypothetical and illustrative purposes only. Adviser’s clients may or may not hold the securities discussed in their portfolios. Adviser makes no representations that any of the securities discussed have been or will be profitable.

Any IPO alerts are purely informational and should not be construed as recommendations to invest.

Adviser is not licensed to provide and does not provide legal, tax or accounting advice to clients. Advice of qualified counsel or accountant should be sought to address any specific situation requiring assistance from such licensed individuals.

Any case studies or hypothetical client profiles are for demonstration purposes only. They illustrate the breadth and depth of the many clients we represent at various life stages. Any similarities to actual Adviser’s clients past or present are strictly coincidental. Individual advice and results will vary based on each client’s circumstances, objectives and prevailing economic conditions.