DGI Adventure – 06-07-16 – Building the CEF Portfolio – Activity Summary

Last month I outlined how I wanted to replace my old fixed income investments with closed end fund (CEF) investments. Then I posted the results of my research into CEFs here and here. If you’re wondering where the part 3 of 3 watch list is, it’s unlikely to materialize. I was going to do a watch list of bond ETFs but there just weren’t many compelling ones. I might still do something in June.

Now those watch lists are both published back at the mother ship with my others. But I’ve added something to the watch list page. Go ahead, take another look (scroll down). I’ll wait…

See that? I built a CEF portfolio tracker! Here’s why:

Out of the funds that I talked about on the two watch lists…I decided I’d like to build a fixed income portfolio out of 10 of them – 4 “high yield” and 6 “not high yield” funds. I came up with rough allocation dollars for each and then projected the annual income. Naturally I did all this in a google sheet, and naturally I published it.

I need a little over $4K (ish) to cover the annual required minimum distribution (RMD) on the inherited IRA. The RMD goes up if the portfolio value goes up, so I’d like a little buffer over that minimum. I built a “hypothetical” fixed income portfolio out of my favorites from the watch lists to see what it would take to get that kind of fixed income. 

I realized that I could get more fixed income (~$5K vs ~$4K) with CEFs than I was getting with my open-ended funds, all while using a lot less invested capital ($65K vs $100K). Pretty sweet!

I also realized that $65K is a lot of money. I don’t want to just invest that all at once. Sure I won’t actually get to my projected $5K of income right away, but I can build up to that. I think it’s prudent to dollar cost average into such a big investment. My goal is to get up to that $65K target by the end of 2016.  And since interactive brokers charges such minimal fees, I can take those little steps pretty cheaply. That was the whole point of switching accounts. Like most of my investments, I’m going to be keeping an eye on the ex-dividend date, and focusing my purchase timing accordingly.

I’m not going to go into a lot narrative about these transactions, but I am committed to publishing every trade I make, so I need to account for changes to the portfolio (yes it’s been updated). So here’s the first installment.

06-02-16 – Six (6) total purchases made, purchase prices include commission costs

MIN: 400 shares purchased @ $4.565/share. NAV $4.91 representing a -7.0% discount to NAV. $1,826 invested out of my target ~$8K.

EAD: 200 shares purchased @ $7.855/share. NAV $8.65 representing a -9.2% discount to NAV. $1,571 invested out of my target ~$6K.

BLW: 100 shares purchased @ $15.1686/share. NAV $16.55 representing a -8.3% discount to NAV. $1,516.86 out of my target ~$5K.

PFL: 200 shares purchased @ $10.155/share. NAV $10.23 representing a -0.73% discount to NAV. $2,031 invested out of my target ~$6K.

EGF: 150 shares purchased @ $13.633/share. NAV $14.38 representing a -5.2% discount to NAV. $2,045 invested out of my target ~$6K.

BKT: 250 shares purchased @ $6.525/share. NAV $6.97 representing a -6.4% discount to NAV. $1,531.25 invested out of my target ~$5K.

06-06-16 – One (1) purchase made, purchase price includes commission costs.

CIK: 500 shares purchased @$2.9454/share. NAV $3.22 representing a -8.5% discount to NAV. $1,472.70 invested out of my target ~$8K

Summary:

$11,993.81 invested out of my target ~$65,000.

$951.30 projected annual income secured of my target of $5,036.22

Commentary

I know…I said I wouldn’t have a lot of narrative. I will say though that this was kind of a jump start. It’s about 18% of the amount I wanted to invest in a pretty short time. Although if keep that pace per month, I will be wrapping this up in November (ish), so maybe that works. Seems like a lot at once though doesn’t it?

I got some pretty good discounts to NAV, but I would probably have done well to wait for a better entry point for PFL. CIK was a strong discount AND it goes ex-dividend today, so that was just in time.  Maybe smaller bites of BKT and EGF were warranted. IDK. Everything seems to be going up after Auntie Janet’s speech, so maybe it’s just as well I went in heavy to get things rolling.

Oh well. Last month’s summary was really missing that fixed income I used to get. I was pretty eager to start replacing it.

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