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Expert on Perferreds & Income Vehicles Wanted: Risk Assessment Requested
Old 04-18-2007, 11:49 PM   #1
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Expert on Perferreds & Income Vehicles Wanted: Risk Assessment Requested

I am relatively new (2nd post) and getting the hang of this.
I would appreciate any critique I can get on the income side (about 58%) of my taxable portfolio. This generates a mix of qualified/unqualified dividends, tax free and taxable interest. My qualified portfolio rounds me out to a 60/40 AA.
Looking for a risk assessment of this part of portfolio.

BPP - Blackrock Opportunity Trust - $30,000
GDV - Gabelli Div and Inc Trust - $18,000
IKL - Bank of America Pfd - $14,000
HGM - General Motors Pfd - $16,000
PYI - PreferredPlus Trust TWC1 - $15,000
TVC - Tennessee Valley Authority Pfd - $14,000
NQU - Nuveen Quality Income Muni Fd - $86,000
FFC - Flaherty & Crumrine Claymore Pfd Sec Inc Fd - $26,000
HTE - Harvest Energy Trust Units Canadian - $25,000
MNP - Western Assets Municipal Partners Fd - $39,500
PWE - Penn West Energy Trust Canadian - $23,000
3 mth T-Bill - $45,000
Cash & CDs - $35,000

I did get pointed to Larry Swedroe's book on Bonds and will be picking that up, as well as his post on diehard.org. Thanks in advance for your thoughts.
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Re: Expert on Perferreds & Income Vehicles Wanted: Risk Assessment Requested
Old 04-19-2007, 07:00 AM   #2
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Re: Expert on Perferreds & Income Vehicles Wanted: Risk Assessment Requested

Wow, you certainly have a grab-bag of stuff. Some of it has quite a lot of credit risk, other bits have very little. All of it has significant interest rate risk, and much of it is callable. I will comment on some:

BPP - trading at a 9% premium to NAV. That would have me selling.
GDV - mostly an equity fund, not fixed income
IKL - probably very low risk, but callable in mid 2008. If rates drop, you will get called at par.
PYI - this is a callable, long maturity time warner bond. Ugh.
TVC - I have looked at this securoty. It has zero credit risk, but the coupon wll be going down. The offset is that you can put it back to the issuer at par. If you are offered the opportunity to put this thing, I would do so.
HTE - not fixed income.

You gots ots of stuff, but most of it is not what I would think of as fixed income or low risk.
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Re: Expert on Perferreds & Income Vehicles Wanted: Risk Assessment Requested
Old 04-19-2007, 09:41 AM   #3
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Re: Expert on Perferreds & Income Vehicles Wanted: Risk Assessment Requested

Thanks Brewer,
yes I guess I look at the dividend producing vehicles as income producing ... very loose interpretation.
I knew that the risk is higher than T-bills, since the returns are much higher. I just don't have a relative feel for how much. The returns range from the mid 5% to over 13%. Some of it is tax free interest. The weighted average for the entire portfolio around 7.9%. Does the return warrent the risk? How does one figure this out? Am I taking too much risk?
I am trying to wean myself out of the 'Vegas' mentality and I guess it is hard to do than I thought.
In any case, I would welcome suggestions on what to do with another $200K to throw at what I am calling the income producing side of the portfolio.
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Re: Expert on Perferreds & Income Vehicles Wanted: Risk Assessment Requested
Old 04-19-2007, 10:06 AM   #4
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Re: Expert on Perferreds & Income Vehicles Wanted: Risk Assessment Requested

I would toss BPP and PYI right off the bat. TVC I would plan on putting back to the issuer if you are offered the chance. Roll the money into more conservative choices, like AGG, BND or IEF.

You;ll have to dig around each of the rest to decide what the risks are and whether you are comfy with them.
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Re: Expert on Perferreds & Income Vehicles Wanted: Risk Assessment Requested
Old 04-19-2007, 10:55 PM   #5
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Re: Expert on Perferreds & Income Vehicles Wanted: Risk Assessment Requested

Thanks Brewer. I appreciate the insights and advice.

Could you give me a fishing lesson please. What do you use to research the different investments. I have a haphazard way of searching. Thanks.
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Re: Expert on Perferreds & Income Vehicles Wanted: Risk Assessment Requested
Old 04-20-2007, 07:08 AM   #6
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Re: Expert on Perferreds & Income Vehicles Wanted: Risk Assessment Requested

For the individual preferreds/bonds, I use: http://www.quantumonline.com/incometables.cfm
You will have to register, but it is free.

For the exchange-traded funds, I start with www.etfconnect.com to get an overview. If a fund is selling at a significant premium to NAV, I am not interested. I also tend to be less enthused with leveraged closed-end funds, since the concentration of risk is foolish in many cases. I also am not interested in funds with an expense ratio north of 1% unless it is trading at a fat discount to NAV (10+% is nice). After looking at stuff at the site, I then track down the latest annual and semi-annual reports from the specific fund (usually atfund company's website) to read what exactly they do and what the managers have to say about past and expected future performance.
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