The order for the investing account through and the Model Portfolio owns its first Business Development Company...
In the video I explain TCAP's strengths but I didn't go into what it adds to the portfolio. At 16:42 in length I think it was long enough but being a Business Development Company (BDC) they can get a bit complex and it was necessary to cover this type of company.
TCAP is the first BDC of the Model Portfolio so its going to add in diversity of tiny equity sector. Since they invest in dozens of tiny companies we can think of TCAP as a no load, no management fee, nano-cap mutual fund. Nano-cap being a company of less then $50m while Micro-cap is $50m-$300m. Its a good way to gain access to that level of company and thusly the economy without being in a true mutual fund.
The 9.72% yield sure doesn't hurt either! That makes it the highest paying position in the portfolio edging out ERF. With a high yield it must give poor dividend growth right? Nope it has a 5 year 7.1% annual growth of the dividend. This means both the portfolio's average yield and average dividend growth grew with this investment.
That high yield comes with a risk. Although TCAP has only 9% of the investing account's money it accounts for over 20% of the income. If I was trying to live off this and only had these positions I would be in trouble if TCAP cut or eliminated its dividend. By the end of Phase 2 of the investing account I'll have 25 positions so long term this is not a risk and since I am not needing to live off of it until long term then there is no risk to endangering my income.
Graphs provided by Fastgraphs.com
Disclaimer: The investments and trades in my videos and blog entries are not recommendations for others. I am not a financial planner, financial advisor, accountant, or tax adviser. The financial actions I talk about are for my own portfolio and money and only suited for my own risk tolerance, strategy, and ideas. Copying another person's financial moves can lead to large losses. Each person needs to do their due diligence in researching and planning their own actions in the financial markets.
EDIT: At the time this blog entry was posted I had a Youtube video here. That has been removed but I want the rest of my content to be remain. Nothing hidden no past mistakes ignored. All out in the open.
In the video I explain TCAP's strengths but I didn't go into what it adds to the portfolio. At 16:42 in length I think it was long enough but being a Business Development Company (BDC) they can get a bit complex and it was necessary to cover this type of company.
TCAP is the first BDC of the Model Portfolio so its going to add in diversity of tiny equity sector. Since they invest in dozens of tiny companies we can think of TCAP as a no load, no management fee, nano-cap mutual fund. Nano-cap being a company of less then $50m while Micro-cap is $50m-$300m. Its a good way to gain access to that level of company and thusly the economy without being in a true mutual fund.
The 9.72% yield sure doesn't hurt either! That makes it the highest paying position in the portfolio edging out ERF. With a high yield it must give poor dividend growth right? Nope it has a 5 year 7.1% annual growth of the dividend. This means both the portfolio's average yield and average dividend growth grew with this investment.
That high yield comes with a risk. Although TCAP has only 9% of the investing account's money it accounts for over 20% of the income. If I was trying to live off this and only had these positions I would be in trouble if TCAP cut or eliminated its dividend. By the end of Phase 2 of the investing account I'll have 25 positions so long term this is not a risk and since I am not needing to live off of it until long term then there is no risk to endangering my income.
Graphs provided by Fastgraphs.com
Disclaimer: The investments and trades in my videos and blog entries are not recommendations for others. I am not a financial planner, financial advisor, accountant, or tax adviser. The financial actions I talk about are for my own portfolio and money and only suited for my own risk tolerance, strategy, and ideas. Copying another person's financial moves can lead to large losses. Each person needs to do their due diligence in researching and planning their own actions in the financial markets.
Very informative, thanks. You mentioned TCAP on a previous post and I have been following it since then. I have a question though.
ReplyDeleteWhat do you think the stock price will do as interest rates rise?
I know REITs and bonds will take a devastating blow immediately, and will continuously suffer the whole ride up. I personally don't watch prices, but at the same time having half of your original value quickly wiped out wouldn't be too fun haha.
I'm not sure really. I would imagine a temporary hit in price because their loans they have given out were given out in comparison to the older lower rates. But then new loans are given out at higher rates because their mezzanine debt is more for companies that cannot get the low regular loans.
DeleteI had thought about this possibility and ended up thinking that low rates are gonna happen until end of 2014 (Fed recently announced that) so three years of 9% yield will do a lot to soften the blow of a pullback in price.