September 2009

 

Investment Grade Value Stock Index soars 24%

 

 

 

Steve Selengut

 

The Investment Grade Value Stock Index is a barometer of a small but elite sector of the stock market. Some Investment Grade Value Stocks are included in all averages and indices, but even the Dow Jones Industrial Average includes several issues that are below Investment Grade and very few boast an A+ S&P rating.

 

The IGVSI tracks a portfolio of approximately 400 stocks - and less than half of them are likely to be found in the S & P 500 average. This new market index was developed in late 2007 to provide a benchmark for the equity portion of investment portfolios managed without open-end mutual funds, index funds, or any of the other popular speculations and hedges that are included in most professionally managed portfolios.

 

Two related indices (the WCMSI and WCMSM) track portfolios of closed-end income funds. Between the three, they serve as an excellent performance expectation development tool for investment portfolios managed according to the disciplines of the Working Capital Model (WCM). Through July 31 2009, these indices soared approximately 24% - about five times the growth of the S&P 500 and twelve times that of the DJIA.

 

The reasons are fairly simple: A diversified portfolio of high quality, dividend-paying equities, combined with an equally well diversified collection of conservative interest paying securities is what investors move into after licking their wounds from failed speculations.

 

Indices that contain the highest quality, dividend paying equities and a variety of historically solid income producers in a manner similar to a conservative personalized portfolio are valuable in helping investors "fine tune" their portfolio performance expectations and their forward-going action plans. The IGVSI is telling us several things right now:

 

There should be profits in your portfolios so make certain you don't let any of them slip through your fingers.

 

Sticking with the QDI (quality, diversification, and income production) safety structure clearly moves you away from market bottoms more quickly than approaches that are based on more speculative methodologies, gimmicks, and hedges. It also puts the brakes on slip-sliding-away market values much sooner than the conventional sell everything low methodology.

 

Clearly, adding dollars to portfolios during corrections (portfolio income plus regular contributions) is a far more productive approach to investing than loss taking and waiting for Wall Street to tell you when the next upturn is about to begin. Just ask yourself: Have I benefited twenty-plus percent from this five-month rally?

 

Additionally, individual securities portfolios are much easier to manage and to monitor as to monthly income production than other forms of investing in times of financial chaos. Income produced by the twenty-five closed end income producers in the WCMSI is pretty much the same now as it was when the downturn began in May of 2007 - particularly when you factor in profits and reinvestment of dividends.

 

Without a doubt, investment portfolios that are able to use the IGVSI, WCMSI, and the WCMSM as their benchmarks are most likely to out-perform the most well known Wall Street benchmarks. They have done so in an environment where congress has killed major institutions and where many interest rate sensitive securities failed to move higher in the face of the lowest interest rates in modern history.

 

It's time to move away from the speculative underbelly of investing; it's time to build an investment future on a foundation of quality, diversification, and income.