Hi OJ, Re: Income investments and Cash Ceiling..........................
Yes, for income type investments I usually put a max cash cap on the investment. It's there for Income, so selling too much of it can be counterproductive. I look at history and what a typical draw down might require of cash to buy effectively and use that value as the ceiling. Income investments aren't necessarily responsive to equity market risk, so I give them a slightly different treatment than stocks or ETFs.
In some cases I let the cash build to 30% but most I cap around 20 or 25%. In most cases I also trade 10% of shares on the Sell side unless I'm close to a cash ceiling and then I'll just sell 5%. (it keeps it closer to the ceiling target) On the buy side I usually buy 12% more shares (about the equivalent of 10% of Portfolio Control).
This round of FED and Treasury Rate interest rate hikes has tested this strategy with large discounts in share price on income components. It's been a nice opportunity to "average up" in yield and "average down" in share price. It's the first time in a while my income portfolio (around 10 individual AIM engines) has come near being 100% invested. I'll post histograms of the various portfolios through Sept. later.
Clip coupons, harvest dividends and trade when AIM suggests. The above suggestions help to keep more of the AIM engine at work.
Best wishes,
OAG Tom
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