DGI Adventure – 01-28-2016 Market Musings – Unit Investment Trust Liquidation

Back in May of 2014 I was talked into buying a Unit
Investment Trust (UIT) in my beneficiary IRA account. The ticker for it was
FGRLEXR, although most places on the innerwebs didn’t recognize that ticker. It
was #23 in a series of “Capital Strength” trusts.

It liquidated this week. It
didn’t do very well

I guess it was Monday they liquidated my 2653.52464 “units” in the trust for $9.2106/unit
netting $24,440.55. I didn’t get the money until today though. Who knows when the actual transaction took place.

I had originally invested $24,142.92, which comes to a
whopping 1.2% total return.

As I’ve outlined previously, I didn’t really know what I was
doing back in May of 2014, but I knew enough to know that I thought that looked
like a pretty damn
good list
of stocks. So I went for it.

The trust bit was definitely sold to me. I remember hearing,
“they only charge us 1% to get in” and “it rolls over after two years, so it
forces you to take a look at things every now and then”. Well sold, investment “adviser”.
Well sold.

True they only charge a 1% “initial transactional” fee. But
they charge 2.45% in “deferred transactional” fees, and then they charge a 0.5%
“creation and development” fee. So they take 4% out of something that by
definition will only exist for 2 years. That’s pretty fucking expensive for a passive investment product.

And yes it “forces you to take a look at things” but it also
forces you to sell on a predetermined date, which is retarded. Of all the times
to sell over the last two years…it had to be this week? Shitty timing, sure…but what benefit is there to a predetermined sell date? It leaves that much more of it all up to random chance.

Oh sure you can roll it over into the next series, and they
might give you a break on the subsequent “initial transactional” fee, but they’re still
charging you the deferred fees every couple of years. And it’s still going to
be sold on the predetermined date, which means you will lock in whatever gains/losses you’ve randomly accumulated. Here’s the latest in the series, Capital
Strength #32
, which has some similar stock names, but is technically totally

Traders, chart junkies, the church of buy and hold…I think
pretty much everybody can agree that this is stupid: pick out stocks using
long-term strategies, but then buy them for a relatively short,  predetermined period of time and handicap the
portfolio by ~4% with fees. What a horrible investment strategy. But I guess it is a great strategy to generate fees.

It would have made money if it weren’t for the fees. I still
feel like that was a pretty good list of stocks. I wanted to keep the stocks.

After I realized what I had gotten myself into, I dug deep
into the prospectus and discovered that I could theoretically take my
distribution in kind (i.e. get the underlying stocks instead of just
liquidating and getting cash). That had been my plan to get out, but when it
came down to the end, they wouldn’t let me do it. They said the request came in
too late, even though I requested it well before the alleged deadline. Maybe my
broker fucked up; maybe it was shenanigans. The whole thing was a boondoggle
and that was the perfect way for it to end. I had $24,000 tied up for almost 2
years and I have dick to show for it. At least I didn’t lose anything…except
for the purchasing power of my money to inflation.

So now I have a bunch of cash, but it’s currently in the
Beneficiary IRA account which is with a high cost adviser/broker
firm. Individual stock trades are like $100 each. I have some good investment ideas, but my hands are tied for now. They’re going to try to sell me some other mutual fund, I’m sure.

I’m done with them. I’ll
be transferring the account soon.

Fun fact: according to
, SPY is technically a UIT with a termination date of January 21st,
2118. So SPY is going to liquidate all of its holdings on January 21st,
2118? Seriously? 

That’s going to be a mess. 

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