CMA’S 9% PASSIVE FIXED INCOME PORTFOLIO ACCOUNT
The US stock market has been quite volatile for the past several years and CDs & Money Market accounts are now only paying 2%. Many savers and investors may be seeking an alternative to higher risk stock market investing and low CD rates. The CMA 9% Passive Fixed Income Portfolio Account is now offered to provide high current income for savings, income, or as an alternative to “growth stock investing”.
WHAT IS THE 9% PASSIVE FIXED INCOME PORTFOLIO ACCOUNT?
This investment Portfolio is designed for "long term investors" seeking high current income over a long period of time such as retirement, or for long term savings time frames for building wealth. The Portfolio is structured to hold only exchange-traded common stocks and income securities of major companies across many industries.
Up to a maximum 15% of total Portfolio assets will be in common equities that pay high dividend yields exceeding 5% and providing opportunities for growth in share value and increasing dividend income over time. The remaining 85% of Portfolio assets will be invested in corporate debt securities, which are senior to common shares of the issuing company, and in the preferred shares of publicly listed companies or their subsidiaries. All these securities are senior to the issuing company’s common stock. Security selection criteria may change from time to time based on market conditions and availability of high income securities.
WHICH ISSUERS MAKE UP THE SECURITIES OF THE PORTFOLIO?
Some of the current common equities used in this segment of the Portfolio are the common stock of: Bank of America, Citizens Communications, Consolidated Edison, Pfizer, Bristol-Myers, Duke Realty, Penn West Energy, Progress Energy, US Bank and Wachovia Bank.
Issuers of the corporate debt securities include: Allianz, CBS Corp, Disney, Duke Power, Ford, GM, Goodyear, Hertz, ING, JC Penney, Royal Caribbean Cruises, Sprint, Valero Energy. Preferred share issuers include: Apartment Investment & Management, American Electric Power, Bancorp South, Cooper Tire, Dayton Power & Light, El Paso Energy, Harris Bank, Hospitality Properties, Healthcare Properties, Southwest Gas. All issuers of Portfolio securities have been in business as a public company, or a subsidiary of a public company, for at least 5 years and others for many decades. Securities selections are diversified across 20 different industries.
HOW CAN AN INVESTOR UTILIZE THIS PORTFOLIO?
Often, investors like to be a part of the "asset allocation" process that means how much of their investment funds are put into different asset classes such as: growth stocks, income real estate securities, fixed income bonds and preferred shares, or near-cash money market. This Portfolio gives them a good choice, an alternative, to park either a small, moderate or large percentage of their assets in a “quiet” high income account. The balance of the client’s assets can then be focused on a different strategy desired by the client like: short term trading, growth, balanced or capital preservation.
HOW IS PORTFOLIO INCOME EARNED AND COLLECTED?
The custodian of your account is collecting all the dividends and interest payments that are paid out by securities’ issuers, and it is credited to each account. Dividends on common stocks, preferred shares and REITs (Real Estate Investment Trusts) are usually paid quarterly, yet some pay monthly distributions to shareholders. On corporate bonds, the interest payments are paid semi-annually to the custodian, and are then credited to the account.
WHAT ARE THE PORTFOLIO EXPENSE COST, MINIMUM SIZE AND MANAGEMENT STYLE?
This high income Portfolio account is offered in a $50,000 minimum account size. CMA charges a .75% annual Investment Advisory Management Fee for managing this Portfolio account. Clients can direct our custodian, GreatBanc Trust Company, to make regular monthly, quarterly or annual distributions of Portfolio income to their checking accounts at their bank via ACH no-cost transfer deposits or receive checks in the mail. GBTC charges a minor custody fee for accounting, trade processing and statement preparation & distribution. If income is not distributed to the client, it will be reinvested within the Portfolio. The Portfolio will be actively managed by CMA, where changes in holdings would be made at times at the discretion of CMA to maintain quality of issuers, high yields, and to replace any called or matured securities.
HOW IS THE PORTFOLIO ACCOUNT ESTABLISHED?
New clients would set up a new account by executing an Investment Advisory Agreement with CMA and new custody account documents with our custodian GreatBanc Trust Company. The client would then fund the new account with cash, and CMA will then buy all the required portfolio securities. Clients would then receive quarterly account statements from the custodian in paper format or electronically, at the client’s selection. All security holdings are held in custody at SEI Trust Company.
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