Capital Management Associates

10 REASONS WHY YOU SHOULD HAVE CMA'S 8% HIGH INCOME PORTFOLIO...

Now is the right time to start locking in high income investment rates, as the Federal Reserve continues to hold short term rates on CDs and money market funds below 2%. CMA's 8% High Income Portfolio could be the right type investment for you. 

Below are 10 reasons why we think the CMA 8% High Income Portfolio can be the answer to what many savers and investors are seeking:

1. CMA 8 % has a “built-in” 8% annual dividend & interest “income” return, plus a moderate potential appreciation upside on the 30% of high-dividend common stocks.  (The 8% income representation means that when the portfolio is purchased for a client account, the custodian states the anticipated "Estimated Annual Income" to be received from the investment holdings, as calculated from the past 12 month of income collections recorded from each security's income payment history.  The "percent value" is determined by dividing the Estimated Annual Income by the Current Market Value of the portfolio holdings).

2. CMA's 8% annual fixed return compares well when compounded against a current annual 1-2% return on CDs and Zero to 1% on money market funds (One year CD rates on www.Bankrate.com are 1.5% and MMA from 0% to 1% as of 4/16/10).  Over 20 years, an 8% re-investment rate on $50,000 could compound to $233,000, whereas 2% on $50,000 compounds to $74,000. At 8% the end result could be 4 times greater. (The total return from compounding could be higher or lower than illustrated, based upon fluctuating interest and dividend payout rates from year to year.)

3. Common stock investing for growth has statistically produced near an average 10% in annual returns since the 1930s through 2000, but in any year or sequence of years the market could decline 10-20% in value loss. Since 2000, the major index of common stocks S&P 500 is down to 1200 from its year 2000 level of 1500.  CMA 8% portfolio creates a more predictable "annual income" return, even though securities prices may fluctuate up and down from year to year.

4. With consumer price inflation currently at 1-3% per year, CMA 8% annual income exceeds consumer price inflation by 3-fold, whereas CDs and money funds may not even match inflation.

5. Holding income investments in CDs and money funds as a long term investment is equivalent to “standing still” or even “loosing ground” on inflation. There is “no” real return or growth in purchasing power over time, if the annual interest return on a CD or money fund does not exceed the inflation rate.

6. CMA 8% is highly diversified on risk by holding securities across many industries that include: banking, telecommunications, gas & electric utilities, insurance, industrial companies, energy, health care and income commercial real estate. These are mature, stable industries.

7. CMA 8% is easy to understand by an investor. It holds income securities: common stocks, preferreds and bonds of well-known companies like: Pfizer, CBS, Disney, Ford, Goodyear, Hertz, Sprint, El Paso Energy, and many others.

8. If one is retired, or using their investment income for living expenses, CMA's 8% “more than triples” the income spending power compared to other short term CD and Money Market Account investments.

9. If one is a growth investor, CMA 8% adds a strong degree of “predictability” on annual investment income that starts with a 8% Estimated Annual Income, plus the growth "potential" of the common stock values, and "potential" for dividend growth also.

10. CMA 8% can greatly help preserve one’s capital, in that 70% of the portfolio securities are senior securities (bonds and preferred shares) of successful public companies, which carry an unconditional promise by each issuer company to payoff or redeem the security at its stated maturity date at its originally issued Par Value.