Here we review our “risky-asset” or “Red Money” investment models in conventional investments in the equities/bond markets to provide the client’s desired level of monthly/annual income. Our target and focus is primarily on the amount of income desired from average dividend returns—our target income from Risky Assets. Here, we aren’t promising these numbers as actual income levels. To project such future returns would be impossible as market conditions change daily—one year we could make dividends but lose 50% of value by year’s end if we suffer another financial collapse like 2008-9. Another year we may move down only 20%. Still another year we may increase equity values by 23%. We are simply charting them as such are easy to visualize as target income values for which we must strive in our Risky Assets investments for illustrative purposes. The use of a Monte Carlo-type simulation are employed in client-specific situations.
Even under the best of circumstances, a Monte Carlo approach will not accurately predict the markets much less annual corporate dividends. The markets will fluctuate, and you will lose money on the way down, dividend income will drop. On the other hand, you might gain money on the way up through appreciation and increased dividends. No one knows how much. A back-cast for each model is supplied below.
Again, Asset Guidance Group, LLC’s proprietary income models developed for other clients to generate the optimal returns (read “income”) are still managed with an eye towards an acceptable level of risk of loss of principal. We manage these in an attempt to manage downside volatility, and thus risk of loss of principal, without sacrificing yield or income you can spend.
You should not focus on the aggregate dollar amounts here as they will not reflect actual future results. Instead, focus on the required yield and the estimated yield numbers we manage our target models to return, knowing that under the best of circumstances there will be a variance in actual results due to the uncertainties inherent in the markets. The best outcome we can hope for is that the economy allows these companies to pay dividends while mitigating Sequence of Returns Risk by blending the folios such that accounts have a chance to recuperate from market volatility amidst the continuing drawdown required to maintain necessary spending levels.
Fees to be charged for assets under management (“AUM”) are generally 1.45% annually for the average size portfolio up to $500,000; 1.25% for accounts ranging from $500,001–$1,000,000. Asset managers for high-worth investors such Fisher Investments generally charge 1.50% for annual AUM fees for accounts of $500,000-$1,000,000.
Click on the appropriate link to review a 5-Year backtest and other information concerning past performance and allocations.
Past performance is no guarantee of future results.