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Author: altstrat91 One star, 50 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 35362  
Subject: Re: Your Best Pal, Ben? Date: 9/21/2012 12:58 PM
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regarding your respective buy lists on the year; my specific interests and strategies only pertain to corps. about 4 months or so ago, the number of corp bond total positions i have breached the four digits mark and i have had some issues in terms of scalability/size and the way i manage the portfolio.

back in 2008, more so 2009 i was focused on buying top tier brand names. took on pretty much all longer term positions. but then in 2010 discovered i did not want to give up that much yield/interest rate risk vs. comfort. not to mention as charlie will eloquently point out majority of those yields were dismal and would not give you a real rate of return. so reality is by the time 2011 rolled around i had been able to bail on some of these long term notes and make a few bucks as the premiums were increasing. eventually as yields kept coming down, i was able to unload everything. believe me, i give myself no credit for this. it was merely random luck and the events of QE 1, 2, etc.

now my portfolio is comprised of <10 year holdings. here is my specific question. when you say here is my buy list, do you guys ride this out or have these positions dynamically changed? my holdings list has changed dozens of times this year.

in other words due to the number of positions i have had to put on, of course some lemons will end up rearing their head. but instead of riding them into the ground i took advantage of the premium appreciation in other holdings to wipe out the loss on a particular position by selling both. so if i see a bond that was trading at 90 cents on the dollar and now is barely holding onto the lower mid $70 handle and i do not like what is happening to the company, i just cut it loose and then sell off the appropriate ratio in a winning position(s) that way bringing my actual principal investment to zero.

the goal is maximizing income stream while preserving principal. but what i forfeit is the fact that in this strategy by bailing on a potential lemon and selling a winning position i obviously no longer get the coupon payment off that winning position, so my income stream takes a hit.

it might just end up boiling down to glass half empty or half full, depending on how you want to look at it. my guess is maybe one or both of you, simply just factor a potential or realized loss/position into your income stream thus lowering your actual YTD rate of return.
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