We start with cash flow – cash flow is a valuable commodity in a world where growth is stagnant and the fear of inflation persists. Municipal bonds form the foundation for a lot of the cash flow; it tends to be a rather inefficient and tricky market. Mispriced bonds do exist, so we work with a wonderful bond manager who seeks out these inefficiencies and delivers the extra return to our clients.
Next is dividends – the core portfolio strategy is made up of individual stocks and a couple of ETF’s that focus on companies with strong balance sheets, reasonable dividends payout rations and the ability to increase these dividend payments over time. We routinely sell covered call over these positions and hedge this portfolio with puts or short positions if valuations appear stretched or there may be questions about the short term outlook of the company.
We also add private investments where appropriate, to client accounts – be they private equity or private loans.
Sometimes these are direct investments in early stage companies or investments in micro Venture capital funds. San Diego seems to lack a strong early stage Venture capital community – this may lead to investment opportunities in terrific companies that generate amazing returns or they may generate a 100% loss – this type of investing tends to be very binary in nature.
Everything we recommend for clients is based upon their goals, risk tolerance and investing acumen.
We look at the below five elements and seek to understand the nature and characteristic of each of them for each client. Is there enough income? Are there liquid assets? Private business interests? Concentrated Stock? Each client has a different mix of parts – our job is to help assemble the pieces the right way, to create your picture.