Tuesday, September 30, 2014 9:21:05 AM
Good morning Toof, Re: buying long dated bond and income funds...........
Your sentiment is correct that standing in front of an oncoming freight train isn't a good idea. The "when" is still hard to predict but probably can be estimated better today than 12 or 24 month ago (or 5 years ago!).
I do watch yield on some funds as a way of gauging a good time to re-deploy some of AIM's cash buildup from these types of investments. For instance, a long term holding of mine, AWF crossed a sort of threshold and is now offering better than a 10% current yield. That said, the price/share has dropped quite a bit in the last 12 months or so as well.
Normally I use a 10% to 12% minimum trade size on AWF as it is a holding for income, not trading profits. I like to take bigger bites with funds like this after bigger moves. However, with surplus cash in the AIM account I was faced with zero yield on the cash and still some distance to when AIM was going to trigger its first buyback. It last sold shares in 2012 in the mid $15 price range. It's now in the mid $13s.
That is a long time for the cash to sit with no yield, but no longer than I've seen several cycles before. The last Buy was in November of 2008! Since then there have been a multitude of sell actions building up the cash to nearly 35% exclusive of the dividends that I harvest as cash.
So, seeing double digit yield potential, I lowered the minimum Buy trade from 12% to 6% which then got AIM's approval to go ahead and make that smaller buy now. Putting the minimum trade on the buy side back to 12% now shifts my 'next buy' price to a full dollar lower than yesterday's buy. If/when it sinks that low, there is still a lot of cash left and those future buys will bring in even better yield.
So, I use a double digit threshold on AWF as a benchmark. If AIM will allow a buy once that threshold is crossed, then I'll take it. Since I buy this as an income component, I don't have to be as concerned with price appreciation. Dividend capture is why I own it.
BTW, when AIM last bought shares of AWF in this account in 2008, the price/share was $6.01! So, my first AIM buyback is more than double that deeply discounted price/share.
(Note: Price/Share is adjusted for dividends paid over time. Actual price/share going back three years was higher than what is shown.)
Your sentiment is correct that standing in front of an oncoming freight train isn't a good idea. The "when" is still hard to predict but probably can be estimated better today than 12 or 24 month ago (or 5 years ago!).
I do watch yield on some funds as a way of gauging a good time to re-deploy some of AIM's cash buildup from these types of investments. For instance, a long term holding of mine, AWF crossed a sort of threshold and is now offering better than a 10% current yield. That said, the price/share has dropped quite a bit in the last 12 months or so as well.
Normally I use a 10% to 12% minimum trade size on AWF as it is a holding for income, not trading profits. I like to take bigger bites with funds like this after bigger moves. However, with surplus cash in the AIM account I was faced with zero yield on the cash and still some distance to when AIM was going to trigger its first buyback. It last sold shares in 2012 in the mid $15 price range. It's now in the mid $13s.
That is a long time for the cash to sit with no yield, but no longer than I've seen several cycles before. The last Buy was in November of 2008! Since then there have been a multitude of sell actions building up the cash to nearly 35% exclusive of the dividends that I harvest as cash.
So, seeing double digit yield potential, I lowered the minimum Buy trade from 12% to 6% which then got AIM's approval to go ahead and make that smaller buy now. Putting the minimum trade on the buy side back to 12% now shifts my 'next buy' price to a full dollar lower than yesterday's buy. If/when it sinks that low, there is still a lot of cash left and those future buys will bring in even better yield.
So, I use a double digit threshold on AWF as a benchmark. If AIM will allow a buy once that threshold is crossed, then I'll take it. Since I buy this as an income component, I don't have to be as concerned with price appreciation. Dividend capture is why I own it.
BTW, when AIM last bought shares of AWF in this account in 2008, the price/share was $6.01! So, my first AIM buyback is more than double that deeply discounted price/share.
(Note: Price/Share is adjusted for dividends paid over time. Actual price/share going back three years was higher than what is shown.)
Best regards,
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