Your (401k) Investment Portfolio: What’s Next

Seven years or so ago, the broad market tracking S & P 500 Index inched past the much higher quality, dividend paying NYSE equity only, Investment Grade Value Stock Index (IGVSI) for the first time in the 21st century. Income Closed End Funds began their Financial Crisis enhanced decline a few months earlier.

Four years ago, the IGVSI had surpassed its 2007 high while the S & P 500 languished significantly lower. Three years ago, both the IGVSI and Closed End Income Funds were ahead of the S & P 500. Two years ago, the index of income CEFS and the IGVSI were above 2007 levels; the S & P 500 was not.
Twenty seven years or so ago, all of the market averages established new all time highs through the middle of August, went boring for about two months, and then crashed spectacularly in an hysterical, short-lived, free fall. Income securities had been beaten down by rising interest rates for a year or more, but rallied when interest rate cuts were used to help reverse the market tailspin… there were few income CEFs at the time.

Twenty six years or so ago, the high quality stocks + 30% or more income purpose securities asset allocation formula had totally erased the crash, while the S & P struggled about 3 years to regain August ’87 levels.
Seventeen years or so ago, a stock market correction ended, and the greatest ever “no value-at-all” stock market con game began. NASDAQ equities, and a dozen or so high tech components of the S & P 500, led the lemmings over the cliff while most high quality equities were discarded irreverently. The NASDAQ remains below turn of the century levels.

There was no interest at all in anything that produced income, tax free or otherwise.

Fourteen years or so ago, while many of the most popular mutual funds went belly-up, IGVSI components and closed end income funds + other income securities again proved to be a viable growth and income formula, as they pushed MCIM (Market Cycle Investment Management) portfolios to new highs while nearly everything else was pummeled.

Beginning to see a pattern here? What’s in your wallet?

Study this chart of the past seven years ( Then insert the three major meltdown scenarios (and recoveries) sketched above. All three were different, but the safest path through them was the same.

Today, we have thousands of, MPT-spawned, derivative speculation machines, creating equity valuations that are just plain ludicrous in the face of all that is wrong with the economic environment. There are similarities to both the 1987 “crash” and to the “dot com bubble”… it’s just a matter of time, and too few of you (and your 401ks) are prepared for the inevitable.

It’s time to take your profits and run… run as fast as you possibly can… to a safer and historically proven, long term focused, working capital growth and income production machine.

Just ask the “investment shadow”, or your advisor, to help you find it.