The Strategic Income Portfolio is designed to provide a steady stream of dividends for those investors seeking total return of investment capital.
At FMD Capital Management, we implement and then consistently adhere to a clear and definable investment strategy for our clients. The primary objective of this portfolio is to maintain both an attractive yield, while also seeking low volatility price appreciation, regardless of the climate in the financial markets. Our actively managed income-generating strategy was designed from the ground up to react quickly and decisively to whatever the market throws our way.
Our predominant investment philosophy centers around the allocation of capital amongst a combination of four “sleeves,” or asset classes of the strategy, which are: 1) dividend paying stocks, 2) fixed-income, 3) alternative income investments, and 4) cash. Subdividing the portfolio gives us the ability to hand-pick investments that are going to intermingle well with one another, so income remains high and volatility low.
A critical component of the Strategic Income Portfolio is the establishment of both minimum and maximum exposure limits in any one sleeve of the portfolio based on the long-term trend of the market. In addition, we analyze the individual sleeves to ensure they work together in a way which creates a cohesive portfolio while taking into account our tolerance for risk and the prevailing market trends.
For example, during bull market periods we seek a higher allocation to dividend stocks and alternative income sources to take advantage of inflationary trends. Conversely, during bear markets or down-cycles, we shift our allocation towards high-quality fixed-income and cash to preserve capital, while still generating dividends in your account. In a transitional phase, or flat market, we may have a more balanced weighting across all asset classes to keep capital protected, but also invested to receive the benefits of income and total return.
Our core holdings in this portfolio consist of mutual funds and exchange traded funds (ETFs). The transparency and low-cost of an index-based ETF is an excellent way to get exposure to a wide variety of income generating assets. The mutual funds that we select typically represent a more complex or dynamic strategy that can’t be replicated using a passively managed ETF. Every investment we select has been extensively researched and screened so that it complements the existing holdings in the portfolio.
The active management portion of our strategy involves the development of macro themes for selecting areas of the market we believe will perform well over the short and long-term. Then we overlay our core risk management philosophy that is grounded in a strong sell discipline to protect capital when market conditions are unfavorable.
The right mix of income-generating assets and the expertise to navigate through any market condition are the two critical components of the Strategic Income Portfolio. You can no longer simply buy and hold an asset and just wait for the income to roll in. These days, you have to go out and grab it. At FMD Capital Management, we know how to grab it.
In addition, we invite you to download our in-depth special report titled, The Strategic Approach to Income Investing.