Attention Investors: It's Time To Check Your Asset Allocation Formula

Examine Your Asset Allocation at Stock Market All Time Highs

Wall Street is celebrating its meteoric five year and three month rise to approximately where it was toward the end of 2007 and, just a skosh above where it was in late 1999. Why are they so excited about this fourteen year march to nowhere? How could Market Cycle Investment Management (MCIM) and some basic asset allocation skills have improved on such dismal performance?

Asset allocation is the essential, step one, planning process that divides the investment portfolio into two purpose-focused "buckets" of securities. The equity bucket should contain only Investment Grade Value Stocks and high quality equity Closed End Funds (CEFs); the income bucket should contain a wide variety of income producing securities, in the form of "experienced" CEFs, select Master Limited Partnerships (MLPs), royalty trusts, and REITs.

There will always be a fully populated income bucket in an MCIM portfolio --- but not so in the equity bucket. There will always be a fully populated income bucket in an MCIM portfolio --- but not so in the equity bucket. All asset allocation calculations use the cost basis of the securities and cash in the portfolio.

About Your Account Statement Asset Allocation Information 

Monthly account statements prepared by Wall Street firms DO  NOT PROVIDE ACCURATE ASSET ALLOCATION INFORMATION --- EVER! They totally disregard the purpose of your income CEF holdings and include them in the pie chart as though they were common stocks.

No MCIM portfolio should ever be invested 100% in equity securities --- absolutely never. 

The purpose of all equities, in whatever form, is the generation of growth produced by realized capital gains; the purpose of income securities is, simply and exclusively, the generation of the largest amount of the safest possible income. 

Dividend income from equities and capital gains from income vehicles are "gravy", as they enhance the flavor of the routine, purpose-directed, activity of the securities. Since MCIM portfolios are populated with only dividend paying stocks and income CEFs, MLPs, and REITs, a whole lot of "gravy" can be anticipated.

And then there is the bonus of market volatility --- only Market Cycle Investment Management uses such high quality investments to benefit from volatile markets. Even the income bucket securities can generate one-year-income-equivalent gains under the right conditions.

At least 2.5% per year in dividends has been generated from IGVSI equities over the past 14 years, and over 6% per year on MCIM income CEFs. At least 30% of all MCIM portfolios is invested in income positions, so the worst case scenario for an MCIM portfolio over the past 14 years should be growth of over 55%, just as a result of reinvested income --- assuming no cash withdrawals from the program.

Thus the significance of asset allocation, and the importance of income generation --- two of the basic tenets of Market Cycle Investment Management.

Your asset allocation may be in need of some "fine tuning", based upon changes in personal/familial circumstances, impending retirement, income needs of various kinds, etc. Such changes are easiest to implement at stock market highs because of the excessive "equity bucket smart cash" generated by profit taking vs. the scarcity of bargain priced IGVSI equities.

Please contact me to discuss your current situation; we'll be in touch with you (LMK Advisees) directly if it appears that some tweaking is warranted.