Rate Hikes and Inflation and Bears, Oh My!

Let me tell you what's truly endangering your wealth

The greatest danger to your wealth isn’t bear markets like the one we’re in now, where the price of everything seems to be in free fall.

It’s not rising interest rates, which have slammed the brakes on the recent housing market boom by pushing mortgage rates to nearly 6 percent.

It’s not geopolitics, though fallout from Russia’s invasion of Ukraine has caused its share of disruption.

It’s not even inflation, which at its highest level in decades is rapidly eroding the value of almost everything.

No—it’s the lack of a clear investment strategy based on defined objectives, sound principles and above all good, reliable information.

And it’s the lack of the needed will, courage, discipline and patience to keep following that strategy, even when the investment markets themselves seem to make no sense and every voice in the media—as well as in your own head—may be telling you to abandon ship.

Whenever there’s a major selling event in the markets, you can count on a chorus of advisors to claim they “called the crash” in advance—with the subtext that you should have been following their strategy all along. I have no intention of doing that here.

But what I will do is tell you a bit about an investment strategy I’ve developed based on 35+ years of advisory experience—some of it hard knocks.

It’s an approach that consistently generates nearly three times the dividend income of the typical S&P 500 ETF, with annual growth even higher than the current rate of inflation; one that’s broadly diversified among companies in multiple sectors that are growing their businesses—also faster than the current rate of inflation—and one that suffers considerably less volatility than the typical S&P 500 ETF as well.

It’s the investment strategy behind my CUI Plus service—a managed portfolio currently with 20 individual holdings. Our current average weighted yield is close to 5 percent and our total return since inception in September 2018 is about 42 percent—which compares to 33 percent for the S&P 500 and 25 percent for the iShares Select Dividend ETF or “DVY”—which is used as a performance benchmark by many investment houses who focus on dividend paying stocks.

Our returns also contrast sharply with the heavy losses investors have been sustaining in bonds, which provide income that never grows.

I credit our outperformance to a simple truth: A diversified and balanced portfolio of well chosen, best in class, dividend paying stocks will always beat a packaged product peddled by big investment firms as for “income investors”—over any period of time that’s significant for long-term returns. And that includes the passive strategies sold by marketing machines like Vanguard, which combine stock and bond ETFs as “Target Retirement Funds.”

Of course, it takes a bit more work to pick your own stocks and build a balanced portfolio around them than it does to buy shares of a pre-packaged ETF. So to make that job easier, CUI Plus points out the best stocks to buy, and tells you how many shares of each to own. My model is set up on a scale of $100,000.

That figure lets readers “right size” holdings by percentages to what they want to invest. A $10,000 portfolio, in other words, can achieve the same results as our model by taking positions one-tenth the recommended amount. A $200,000 portfolio would take positions twice the recommended amount and so on. Every CUI Plus update also provides in depth analysis of each of our holdings.

You don’t have to read it all to follow the recommendations. But you will find everything you need to know about what’s going on at our companies, and the rationale behind the recommendation. And that includes when there are advice changes, whether that’s buying more of the company, selling a piece of the position or unloading the whole thing.

Incidentally, I make a practice of only selling for one of two reasons.

If the underlying business of the company is weakening, we want to get as far away from its stock as soon as possible.

And second, it a stock’s price has reached a valuation I don’t believe is sustainable, we’ll sell some of the position to free up cash.

That’s a step I’ve actually taken nine times in the last six months or so. And as a result, we were able to lock in some rather big gains in advance of this stock market selloff. I would never pretend that past performance guarantees future results.

And several portfolio stocks right now are at lower prices than they’ve been for a while. That’s because even stocks of the strongest companies can only hope to outperform a bear market—not dodge one completely.

The silver lining: If your objective is income and long-term wealth building, today’s lower stock prices make this a great time to give our CUI Plus investment strategy a try.

For more, please visit our website:

https://conradsutilityinvestor.com/