Smartest Guys in the Room – eh, eh, Underperform – Really!


Extensive studies now prove that most of the claimed “smartest people” underperform when it comes to picking stocks and running Mutual Funds and ETF. A recent Wall Street Journal article “The Dying Business of Picking Stocks” clearly provides proof that MOST of the people who claim to be the “experts” can’t even outperform a simple Index, like the S&P 500 index. Most of the big name mutual funds do not outperform the dirt cheap Vanguard 500 Index Fund.



I’ve been watching these people on CNBC and other channels for many years, they use big words and show complex charts telling us to buy this, sell that and yet they underperform! Pension funds, 401K retirement plans and so forth are dropping Hedge funds, Actively Managed funds and general stock pickers. Actively Managed funds use fancy stock picking methods and always charge higher fees to pay all these “stock pickers”, yet they underperform.

Fact: Over the last decade ending June 30th, between 71% and 93% of active US stock mutual funds have either closed or they have underperformed the index they are trying to beat.  San Diego County Employees Retirement Association recently moved 25% of its assets into index funds averaging just .05% fees, vs. the previous 1.1% fees.

How much are you paying in fees for your Mutual or ETF funds?


Analysis of My Accounts:
I did an analysis of all of my holdings for 2016, factoring in dividends for total returns. I compared month by month my accounts performance vs if I had just started the year with all my money in either QQQ (PowerShares Nasdaq top 100 stocks) or SPY (SPDR S&P 500 ETF).

Here is what I found in my accounts.

  • My taxable account, thru September performed slightly better than the QQQ Nasdaq, and slightly less than the SPY S&P 500 Index.
  • My IRA accounts out performed both, only because I invest in high yield, averaging almost 7% dividend yields, and have had nice appreciation this year. However, I view this account as a future “Income” account and I’m not looking for price appreciation, just income. A concept that some people have a hard time understanding.

What should you do?
Follow the rest of the money, examine your Mutual funds, ETF’s and stocks you own. Compare them to the performance of a very inexpensive S&P 500 ETF like Vanguard VOO with .05% fees, or the Vanguard VFINX Mutual fund. Unless you have special stock picking skills or need special dividend needs you might want to have a large portion of your investments in a simple index fund.








Bank of America Preferred – A Really, Really Good 6% Situation


Most people who follow my blog know that I like Preferred Shares in my High Yield IRA account. High on my list are bank preferred shares, which tend to be a very reliable source of income.

Here is a really special situation that you might want to take advantage of.

The Preferred Stock is BAC-L, Bank of America, 7.25% Non-Cumulative Convertible Preferred Stock, Series L. This is a $1,000 par value preferred, that pays $72.50 a year in “qualified dividends”. The key to this stock is the “Convertible” designation, these shares won’t be called because the conversion price is probably not achievable.  It is convertible into 20 shares of BAC if the common trades above $65 (130% of $50) for 20 out of 30 consecutive days. However the current BAC common price is about $16.

Normally I would never buy a preferred stock well above its par value ($1,000), it is currently trading at $1,213. However, this is a 6% yield even at a premium. In addition, if you look at a multi-year chart, there is a lot of price support at current levels.

Bank of America sold this preferred back during the financial crisis and is now stuck with it. They can’t call it! They could repurchase the shares in the open market, but this would further drive up the price.

This is a great deal!

I bought another chunk today using a limit order at $1,213.

My Favorite BDC’s – Making me Money & Doubling Every 7 Years

Concept for good investment and money making

Concept for good investment and money making

Ares Capital Corporation (ARCC) is a battle tested Business Development Company with a disciplined investment process and long-term historic performance. The company easily covers its dividend and has delivered excellent performance over the last 10 years.

In the chart below you will see the dividends paid, the current yield is 9.79%.


Rule of 72’s, at 9.79% yield, you will double your money in 7.25 years!

The shares have delivered excellent Total Returns over the past 10 years. ARCC returned to its shareholders 194%, almost twice outperforming the S&P 500 which returned just 98% for the period.


So, what are BDC’s? They are companies that function like Venture Capital or Private Equity funds however they allow smaller investors like you and me to invest in their companies. VC and PE funds are often closed to all but wealthy investors. BDCs, on the other hand, allow anyone who purchases a share to participate in the open market.

BDCs have become popular since they pay little or no corporate income tax and must distribute at least 90 percent of taxable income as dividends to investors. Many BDC’s distribute 98 percent of their taxable income to avoid all corporate taxation. This results in many cases in both capital growth and high-yields. Returns to the stock holder matches the on the type of income earned by the BDC. Ordinary income to the BDC is taxable to us as ordinary income and their capital gains is generally taxable to us as capital gains.

I have a few BDC’s that have done well for me over the years.

ARCC and Main are the “Blue Chips” of the sector, and offers value for conservative dividend investors, like me who want to buy and hold for the long run. I also hold and like HZRN and HGTC.

Here are my current holdings, they represent 9% of my IRA Portfolio and their current yield.


By allocating a portion of your portfolio to some of these ultra-high-yielding investments you’ll be able to improve your cash flow while waiting for your money to double!


Our SCORE Chapter – Platinum Award!


Our SCORE Chapter servicing Pasco-Hernando Counties in Florida has again been awarded Platinum status, along with our SCORE District being nationally named District of the Year.

Serving on our SCORE Chapter’s Board of Directors and being an active Certified Mentor has been a very rewarding experience for me. Meeting with CEO’s and helping small businesses grow has produced many friends and a lot of personal satisfaction.

We are proud to announce that our SCORE Chapter generated the following results this Year:
New Businesses Started —- 177*
New Jobs Created —- 252*
Mentoring Sessions —- 1,508
73 Workshops with 808 Attendees

These results are excellent and considering that of our 25-30 volunteer members about a dozen of us account for the majority of the clients and  consulting sessions.

You are welcome to visit our SCORE Chapter site HERE.

*The SCORE Foundation engaged Pricewaterhouse Coopers to provide this study for 2015 (most current report) Other figures are from FY 16, October 2015 – September 2016.


My Favorite Preferred Stocks – High Dividends and Safety During Slow Growth Times


The stock market looks uncertain, slow growth will be with us for years, bonds look risky and I want to make sure I can get my 5 – 8% Safe and Stable Income. I am drawn to Preferred Stocks because of their focus on delivering regular dividend payments.

These preferred stocks tend to be boring, they just sit there flat as a pancake and generate income for us.

Check out the chart below, since 1997, the yield on preferreds has averaged nearly 2.4% higher than the yield of corporate bonds, and 5.7& higher than common stocks. There has not been a single year on this chart where stocks or bonds has yielded more than preferreds.


So how safe are preferred stock dividends, safer than common stock dividends. Preferred stocks are positioned between common stocks and bonds. See the chart below:


Most commonly preferred shares carry no voting rights but have a higher claim to earnings than common share and are usually less volatile than common. When the S&P 500 fell 37% in 2008, for example, the iShares preferred fund fell only 24%. Investors can easily choose from preferred stock ETF’s or individual stocks.

I happen to like the safety of financial based preferred stocks. Here are my current holding, they represent 28% of my IRA portfolio.