Avoiding Common Business Loan Mistakes

Surveys show that 94.7% of small business owners feel their only lending resources are local banks or personal credit cards. This common sense advice will help you avoid these common business loan mistakes, regardless of your personal credit history... and avoid pledging your personal property as collateral.

First of all, getting approved for a commercial loan is definitely easier than getting personal loans... regardless of your personal credit scores. Additionally, getting the right types of corporate credit is absolutely critical: if you want to protect your personal assets, minimize the risk of a personal lawsuit affecting your business, and to your ability to weather the economic changes that happen overnight.

All business owners must be much more proactive about developing relationships with the right types of lending institutions. You usually want to start your application process with out-of-state, national lenders... not your local or regional banking institutions. National lenders typically won't require a personal guarantee or your social security number.

Follow this simple roadmap to obtain a small business startup loan, a business debt consolidation loan, a bad credit business loan, or a government business loan... although I strongly recommend that you find a commercial loan expert who can help you through the process of building a strong corporate credit rating.

Finding a competent business loan expert will give you a head start on your competition & also let you focus on running your day-to-day activities... instead of dealing with the hassles of establishing a strong business credit rating. An excellent business credit score can help your company's image, overnight. And, finding a small business loan expert isn't that difficult. You just need to know where to look.

Now... let's get started... before you start applying for any business loans!

1. How is your business structured? Is it a sole proprietorship, C-corporation, S-Corporation, Limited-Liability Corporation (LLC), Partnership, or Trust?

2. How long has your business been recognized by your State & Local government?

3. Has your company ever had derogatory information reported against it to either of the two (2) most popular business credit reporting agencies, Dun & Bradstreet or Experian?

4. Are your commercial permits, licenses and registrations current?

5. Does your business have a physical address, or are you trying to use a U.S. Post Office Box instead?

6. Is your business telephone number recognized by directory assistance?

7. Are your incoming telephone calls professionally answered in your business name?

8. Have you established a business checking account?

9. Have you registered & asked for an Employer Identification Number (also known as an EIN) from the IRS?

If your answer to the first question was a sole proprietorship, partnership or trust; I urge you to re-establish your company as a corporation or LLC. I'm not going to provide you with legal advice, but many CPAs and attorneys highly recommend
LLCs (Limited Liability Corporations) as a way of protecting your personal assets & estate... in the event of any lawsuits being filed against your company.

As a sole proprietor, your personal assets are at direct risk of seizure or forfeiture when faced with most types of legal action. Additionally, if you are applying for business loans in a corporation's name... most lending institutions will not require you to provide any personal guarantee!

A corporation can still face difficulties applying for business credit, if it has been in business less than two (2) years or had previous credit problems reported against it. Here are some ways to fix these problems.

- Purchasing a "shelf corporation" or "aged corporation" that's been in good standing with your State government (for longer than 2 years) can drastically improve your chances for small business loan approval.

- You can attempt to repair your business credit rating by writing dispute letters to Experian or Dun & Bradstreet, which isn't always possible.

- Some corporate credit experts will help you find, select & purchase an established "shelf" or "aged" corporation, some of which already have strong credit ratings established... saving you alot of hassles!

I cannot stress this enough... you MUST have a physical address (not a PO Box) if you want to establish a solid business credit rating. The same thing is said for telephone numbers & the way incoming phone calls are handled. Would you lend
money to a company that does not appear to have a physical address or documented telephone number?

And, don't forget to always keep your commercial permits, licenses & registrations current... and always keep copies of these documents in case a potential lender asks for this information.

Business checking accounts are a must. Again, this proves stability to your potential lenders. Here are a couple of tips for you, in case you've had any checking accounts closed by a financial institution. Pay off the outstanding balance (if any) that's being reported by the bank, or open a checking account at a bank or credit union that doesn't use the ChexSystems credit reporting system. Most credit unions don't use ChexSystems, and you can always find a list of banking institutions in your area that don't use ChexSystems... by simply doing a search on Google, Yahoo or MSN.

Small business credit ratings are tracked using your business name, business address and employer identification number (EIN). You can apply for & receive an EIN at the IRS's website (irs.gov). You can also call the IRS, but be prepared for long waits.

Then you'll want to obtain a D-U-N-S number from Dun & Bradstreet, the largest business credit reporting agency. You can apply for this without any fees at Dun & Bradstreet's website (dnb.com), and you'll usually receive this number within
thirty (30) days. Do not apply for this number until you've prepared your self thoroughly, because any information you give to them... goes into your credit file... permanently.

After you've obtained your D-U-N-S number, you're probably ready to start establishing some vendor credit. Vendor credit is where many business owners start establishing business credit ratings. Simply go to staples.com, officemax.com or officedepot.com to get started. Then, you'll also need to fax your business telephone bill & the credit application to them... on your business letterhead (which you can create using your favorite word processing software if you don't have expensive stationery). They usually don't require any personal guarantees (if you've followed the outline above), and you'll usually receive a starting credit line of $750.

This is critical & I repeat... critical! Always pay your invoices before the grace periods begin... especially on unsecured credit cards or vendor credit lines. Dun & Bradstreet will lower your credit score for every day a creditor reports your bill as unpaid while you're within your grace period. Whereas, personal credit scores are not lowered unless you are 30+ days past your due date.

Dun & Bradstreet reports what's known as a Paydex score (your corporate credit score), and a score of 80 is very good... with 100 being the highest score you can achieve. Your Paydex score is issued once you've established a known
vendor/credit relationship with at least five (5) creditors.

There are shortcuts that will help you get much more than $750 alot faster. When using a business credit expert, most small business owners (even startups) can be approved for vendor credit lines of $25,000-$50,000 and open credit lines of
$50,000, $250,000, $500,000 or more... in as little as 45-60 days... by using their knowledge of the application process & "shelf" corporations.

Now, it's your choice. Are you going to go against the grain & try to establish business credit on your own (which could prove costly to your business health, growth & survival)? Or, will you choose to utilize a corporate credit expert... allowing you to remain focused on your daily business needs?

Most business owners make the mistake of trying to do this on their own... usually trying to find grants, investor "angel" money, or falling back onto the "personal credit card sword". Don't be a casualty like the rest. Learn more about how you can use the same tools that informed, educated millionaires have been using for decades.

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Electronic Currency Exchange

One of the easiest ways to make money online today is to learn e-currency trading. Many people have spent countless hours looking for the perfect program that will make them a millionaire over night. The truth is, these programs do not exist. Electronic currency exchange allows people to make a long-term investment that can yield substantial profits in years to come.

There are a number of courses available online that can help anyone get started and become successful in the currency exchange market. These courses offer essential resources and techniques that will help even the novice user make the most of their investment.

The first thing one would do if interested in getting started in e-currency trading is to open a portfolio. After the creation of their portfolio an initial investment is then made. The portfolio will receive daily gains of anywhere from 2.% to .4%. Therefore on a $1,000 investment a user can expect to profit very close to $5 per day. Over the course of a year it is not uncommon to turn an initial investment of $1,000 into a $50,000 portfolio where they will realize profits of $200 a day.

The most recent course that I have looked at has been the Mazu course. The course provides one on one phone support, conference calls, chat rooms, forums, and a beginner and advanced course on how to trade in the e-currency exchange market. After having reviewed the Mazu program it turned out to be a very helpful legitimate program.

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Best No Load Mutual Funds: The Right Way to Look at Fees and Expenses

Metrics such as price/earnings ratio and dividend yield on the S&P 500 index, a commonly used proxy for the U.S. stock market, are hardly at bargain levels. This has lead several market pundits to predict single digit annual returns for domestic mutual funds over the next decade.

While pursuing the search for the best mutual fund, some mutual fund investors tend to focus exclusively on fees and expense ratios. The rationale is that by choosing mutual funds with low fees, investors will have more of their capital invested. Also, no load mutual funds with low expense ratios will pass on more of the returns they earn to their shareholders.

Is shopping for the lowest fees and expense ratios a smart way to select mutual funds? Not always. The answer depends on the type of mutual fund you are evaluating, the time you can devote to evaluating and managing your mutual funds investments, and the type of cost incurred.

Investing in the Best No Load Index Mutual Funds.
If you believe markets are generally efficient and prefer to invest in an index mutual fund to achieve an index-like return, shopping for the best index mutual fund based on low fees and a low expense ratio makes good sense. The portfolio manager of an index mutual fund endeavors to invest the fund's assets to track the index as closely and cost-effectively as possible. Larger index funds have an advantage in that they can spread their operating costs over a larger asset base.

Some of the interesting index mutual fund options currently available include no load index mutual funds like E*Trade S&P 500 Index Fund (Nasdaq: ETSPX), Fidelity Spartan 500 Index Fund (Nasdaq: FSMKX), and Vanguard 500 Index Fund (Nasdaq: VFINX) with expense ratios of 0.09%, 0.10%, and 0.18%, respectively.

Investing in Actively Managed Mutual Funds and Strategies.
Mutual fund fees and expenses are just one of several important factors to consider if you believe portfolio managers can add value and out-perform the index through active management. The portfolio manager's ability and investing style are just as important. Therefore, seeking out the best mutual fund based on just low fees and a low expense ratio may not always be the right approach. It may just be a case of being 'penny-wise and pound-foolish'.

Legendary investor Peter Lynch, who managed the Fidelity Magellan Fund (Nasdaq: FMAGX) from 1977 to 1990, achieved returns well in excess of the market averages even after accounting for the fund's fees and expenses.

So too has Bill Miller who currently manages the Legg Mason Value Trust (Nasdaq: LMVTX). Even after accounting for its relatively high 1.7% expense ratio, this no load mutual fund has achieved compound annual returns of 18.6% for the 10 year period ending in 2004, well in excess of 12.0% for the Vanguard 500 Index mutual fund.

AlphaProfit, an investment research firm that specializes in active sector investing, uses the no load Fidelity Select Funds to implement its investing strategy through its CoreTM and FocusTM model portfolios. Although not the lowest, the expense ratio of the no load Fidelity Select Funds compares favorably with that of other sector fund offerings. AlphaProfit prefers Fidelity Selects for their comprehensive coverage of sectors and industry groups. The AlphaProfit model portfolios have significantly outperformed the market averages over time.

Ensure Your Mutual Fund Puts Your Interest First.
Whether you prefer to index or take an active approach to managing your investments, ensuring that your mutual fund is putting your interests first is good investing practice.

Mutual funds charge different types of fees. By looking at some key factors pertaining to fees, you can get a sense of whether the mutual fund puts your interests first or merely seeks to line the mutual fund company's pockets.

Serving the Interests of Long-Term Shareholders.
Some mutual funds impose short-term trading fees to discourage frequent trading of mutual fund shares. Frequent
trading disrupts efficient management of the mutual fund and increases operating expenses. A short-term trading fee can therefore actually be beneficial to long-term shareholders if the fee is rightly treated by the mutual fund company.

Fidelity Spartan Total Market Index Fund (Nasdaq: FSTMX), for example, follows the practice of returning short-term trading fees collected on shares held less than 90 days to the mutual fund itself rather than passing on the benefit to the mutual fund company. By having this short-term trading fee structure, this no load mutual fund seeks to contain its operating expenses. Such fees are therefore aligned with the interests of long-term shareholders of this mutual fund.

Passing on Savings from Scale Economies.
The operating expenses incurred by a mutual fund are a combination of fixed and variable costs. As the asset of a mutual fund increases, the fixed cost gets spread over a larger asset base. Therefore, the expenses incurred to operate the mutual fund as a percentage of the fund's assets should trend lower.

A mutual fund that places the interest of shareholders first must pass on the savings from scale economies to the shareholders. The trend in a mutual fund's expense ratio therefore serves as a metric of how seriously a fund takes its fiduciary responsibility.

Key Points.
1. If you are searching for the best no load index mutual fund, shopping for one with low fees and expenses makes perfect sense.
2. If active management of investments appeals to you, fees and expenses are just one of several important factors to consider.
The ability and investing style of the portfolio manager are at least just as important as fees.
3. The types of fees a mutual fund charges and how the fund uses the fees provides clues as to how seriously a mutual fund takes its fiduciary responsibility. Mutual funds that impose fees to contain operating expenses and return fees to the mutual fund help protect the interests of long-term shareholders.
4. Mutual funds that put the shareholders' interests first typically pass on savings from scale economies to the shareholders.


Notes: This report is for information purposes only. Nothing herein should be construed as an offer to buy or sell securities or to give individual investment advice. This report does not have regard to the specific investment objectives, financial situation, and particular needs of any specific person who may receive this report. The information contained in this report is obtained from various sources believed to be accurate and is provided without warranties of any kind. AlphaProfit Investments, LLC does not represent that this information, including any third party information, is accurate or complete and it should not be relied upon as such. AlphaProfit Investments, LLC is not responsible for any errors or omissions herein. Opinions expressed herein reflect the opinion of AlphaProfit Investments, LLC and are subject to change without notice. AlphaProfit Investments, LLC disclaims any liability for any direct or incidental loss incurred by applying any of the information in this report. The third-party trademarks or service marks appearing within this report are the property of their respective owners. All other trademarks appearing herein are the property of AlphaProfit Investments, LLC. Owners and employees of AlphaProfit Investments, LLC for their own accounts invest in the Fidelity Mutual Funds included in the AlphaProfit Core and Focus model portfolios. AlphaProfit Investments, LLC neither is associated with nor receives any compensation from Fidelity Investments or other mutual fund companies mentioned in this report. Past performance is neither an indication of nor a guarantee for future results. No part of this document may be reproduced in any manner without written permission of AlphaProfit Investments, LLC. Copyright © 2005 AlphaProfit Investments, LLC. All rights reserved.

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Morningstar Mutual Funds Fiduciary Grades: What Investors Need to Know

Mutual fund investors use Morningstar RatingTM as a sign post of mutual fund performance. These ratings have proved to be a valuable tool for objectively comparing the performances of different mutual funds.

In 2003, New York Attorney General, Elliott Spitzer launched actions against some mutual fund companies for allowing their privileged clients to profit from improper activities such as late trading.

In the aftermath of these developments, investors realize that they need more than the historical performance based Morningstar Ratings to evaluate mutual funds. The Morningstar Ratings do not get at critical intangibles. How seriously does the mutual fund company take its fiduciary responsibility to mutual fund investors? How aligned are the interests of the mutual fund manager and the mutual fund company with those of the mutual fund investor?

To address this need, Morningstar has embarked on a system called the Fiduciary Grade. Morningstar has so far graded about 635 mutual funds, including 500 of the largest ones. Morningstar plans to provide Fiduciary Grades for a total of 2000 mutual funds over time.

The Morningstar Fiduciary Grade System Basics

The Morningstar Fiduciary Grade is based on the evaluation of five areas critical for mutual fund governance and mutual fund operations. Morningstar generally assigns to mutual funds points ranging from 0 (Very Poor) to 2 (Excellent) in increments of 0.5 for each of these five areas.

1. Regulatory Issues: Morningstar examines if the mutual fund company has had any regulatory issues within the past three years. If so, what corrective actions has the mutual fund company implemented? Unlike the other four areas, the minimum score here can be a minus 2.

2. Board Quality: Morningstar looks for a demonstrated track record of the mutual fund board protecting the interests of mutual fund investors. Mutual funds get kudos if their independent directors invest in the mutual funds.

3. Manager Incentives: This score is based on Morningstar's evaluation of mutual fund ownership and compensation structure. Mutual funds where the fund's manager owns a meaningful stake in the fund score high on the fund ownership dimension. A compensation structure that rewards the mutual fund manager for long-term mutual fund performance is favored.

4. Fees: Mutual funds are rewarded for having expense ratios lower than that of their peers and for effectively reducing their expense ratios with growth in their assets.

5. Corporate Culture: Morningstar looks for tangible evidence that the mutual fund company takes its fiduciary responsibility seriously. Among the factors Morningstar considers are softer issues like whether the company closes mutual funds when they get too large and whether the company starts trendy mutual funds to garner assets.

The points scored on each of the above areas are aggregated and the Fiduciary Grade is assigned based on the total: A=9-10, B=7-8.5, C=5-6.5, D=3-4.5, F=2.5 or less.

How Investors Can Use the Morningstar Fiduciary Grade

Here are some ways investors can use the Morningstar Fiduciary Grade.

1. Buy and Hold Investors: Buy and hold mutual fund investors first need to examine how mutual funds held in their portfolios stack up on the two dimensions, Morningstar Rating and Fiduciary Grade.

Mutual funds that rank favorably on both dimensions may be retained and mutual funds that rank unfavorably on both dimensions may be replaced by ones that rank favorably.

For mutual funds that rank favorably in one dimension but not in the other, the answer is not clear-cut. Retaining a fund with strong Morningstar Rating but lower Fiduciary Grade is a matter of personal choice. Conversely, a mutual fund's Fiduciary Grade may be satisfactory but the Morningstar Rating may be unfavorable. This may just be a case of the mutual fund manager going through a temporary bad patch. Investors have to weigh these factors along with tax consequences before deciding to sell a mutual fund.

Given the number of mutual funds available, investors seeking new mutual funds to add to their portfolio should in general have no trouble in finding mutual funds with favorable Morningstar Rating as well as Fiduciary Grade.

2. Tactical Asset Allocators: A tactical asset allocator uses an active investment strategy and typically invests in mutual funds such as sector funds. For example, AlphaProfit uses its ValuM investment process to periodically alter the mix of its mutual fund model portfolios to take advantage of specific trends (e.g. rising natural gas prices, introduction of new wireless technologies).

Since tactical asset allocators seek superior performance during their mutual fund holding period, factors such as superior long-term performance which determine Morningstar Ratings are less important to them. However, these investors typically seek to own mutual funds within a single family such as Fidelity Investments for purposes of administrative ease. As such, tactical asset allocators will find the Fiduciary Grade useful in evaluating and choosing mutual fund families to implement their strategies.

Our Take on the Morningstar Fiduciary Grade System

The Fiduciary Grade system is a blend of several metrics. The grading of mutual funds on regulatory issues is backward looking rather than a prognosticator of potential future trouble. The grading system includes a quantitative dimension in mutual fund fees. Also included are qualitative dimensions such as mutual fund corporate culture, manager incentives, and board quality.

The Mutual Fund Fiduciary Grade ranking provides mutual fund investors with much needed insight on the governance and operations of mutual funds. The Morningstar Fiduciary Grade System is a good first step. We believe Morningstar will refine the Mutual Fund Fiduciary Grade system over time, just as they refined the Morningstar Ratings system.

While Morningstar Ratings do an excellent job of objectively evaluating past performance, financial markets by their very nature do not allow the investor to predict future performance based on these ratings alone. Many times, funds with Morningstar Ratings of 4- or 5-star do not live up to their expectations.

The utility of the Morningstar Fiduciary Grade will be significantly enhanced if superior Fiduciary Grade either by itself or in combination with the Morningstar Rating becomes a better indicator of superior future performance. We believe the Morningstar Fiduciary Grade has the potential to become a worthy metric of mutual fund stewardship over time.

Notes: This report is for information purposes only. Nothing herein should be construed as an offer to buy or sell securities or to give individual investment advice. This report does not have regard to the specific investment objectives, financial situation, and particular needs of any specific person who may receive this report. The information contained in this report is obtained from various sources believed to be accurate and is provided without warranties of any kind. AlphaProfit Investments, LLC does not represent that this information, including any third party information, is accurate or complete and it should not be relied upon as such. AlphaProfit Investments, LLC is not responsible for any errors or omissions herein. Opinions expressed herein reflect the opinion of AlphaProfit Investments, LLC and are subject to change without notice. AlphaProfit Investments, LLC disclaims any liability for any direct or incidental loss incurred by a pplying any of the information in this report. Morningstar RatingTM is a trademark of Morningstar, Inc. The third-party trademarks or service marks appearing within this report are the property of their respective owners. All other trademarks appearing herein are the property of AlphaProfit Investments, LLC. Owners and employees of AlphaProfit Investments, LLC for their own accounts invest in the Fidelity Mutual Funds. AlphaProfit Investments, LLC neither is associated with nor receives any compensation from Fidelity Investments. Past performance is neither an indication of nor a guarantee for future results. No part of this document may be reproduced in any manner without written permission of AlphaProfit Investments, LLC. Copyright © 2004 AlphaProfit Investments, LLC. All rights reserved.

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Income Investing: Selecting the Right Stuff

When is 3 percent better than 6 percent? Yeah, we all know the answer, but only until the prices of the securities we already own begin to fall. Then, logic and mathematical acumen disappear and we become susceptible to all kinds of special cures for the periodic onset of higher interest rates. We'll be told to sit in cash until rates stop rising, or to sell the securities we own now, before they lose even more of their precious Market Value. Other gurus will suggest the purchase of shorter-term bonds or CDs (ugh) to stem the tide of the perceived erosion in portfolio values. There are two important things that your mother never told you about Income Investing: (1) Higher Interest Rates are good for investors, even better than lower rates, and (2) Selecting the right securities to take advantage of the interest rate cycle is not particularly difficult.

Higher Interest Rates are the result of the Government's efforts to slow a growing economy in hopes of preventing an appearance of the three headed inflation monster. A quick glance over your shoulder might remind you of recent times when the government was trying to heal the wounds of a misguided Wall Street attack on traditional investment principles by lowering interest rates. The strategy worked, the economy rebounded, and Wall Street is trying to scramble back to where it was nearly six years ago. Think about the impact of changing interest rates on your Income Securities during the past five years. Bonds and Preferred Stocks; Government and Municipal Securities; they all moved higher in Market Value. Sure you felt wealthier, but the increase in your Annual Spendable Income got smaller and smaller. Your total income could well have decreased during the period as higher interest rate holdings were called away (at face value), and reinvestments were made at lower yields!

How many of you have mental bruises from the realization that you could have taken profits during the downward trajectory of the cycle, on the very securities that you now lament over. The nerve; falling below the price you paid for them years ago. But the income on these turncoats is the same as it was in 2004, when their prices were ten or twenty percent higher. This is the work of Mother Nature's financial twin sister. It's like acorns, snowfalls, and crocuses. You need to dress properly for seasonal changes and invest properly for cyclical changes. Remember the days of Bearer Bonds? There was never a whisper about Market Value erosian. Was it the IRS or Institutional Wall Street that took them away?

Higher rates are good for investors, particularly when retirement is a factor in your investment decisions. The more you receive for your reinvestment dollars, the more likely it is that you won't need a second job to maintain your standard of living. I know of no retail entity, from grocery store to cruise line that will accept the Market Value of your portfolio as payment for goods or services. Income pays the bills, more is always better than less, and only increased income levels can protect you from inflation! So, you say, how does a person take advantage of the cyclical nature of interest rates to garner the best possible income on investment quality securities? You might also ask why Wall Street makes such a fuss about the dismal bond market and offers more of their patented Sell Low, Buy High advisories, but that should be fairly obvious. An unhappy investor is Wall Streets best customer.

Selecting the right securities to take advantage of the interest rate cycle is not particularly difficult, but it does require a change in focus from the statement bottom line... and the use of a few security types that you may not be 100% comfortable with. I'm going to assume that you are familiar with these investments, each of which could be considered (from time to time) for a spot in the well diversified Income Portion of your Asset Allocation: (1) The traditional individual Municipal and Corporate Bonds, Treasuries, Government Agency Securities, and Preferred Stocks. (2) The eyebrow raising Unit Trust varietals, Closed End Funds, Royalty Trusts, and REITs. [Purposely excluded: CDs and Money Funds, which are not investments by definition; CMOs and Zeros, mutations developed by some sicko MBAs; and Open End Mutual Funds, which just can't work because they are really "managed by the mob"... i.e., investors.] The market rules that apply to all of these are fairly predictable, but the ability to create a safer, higher yielding, and flexible portfolio varies considerably within the security types. For example, most people who invest in Individual bonds wind up with a laundry list of odd lot positions, with short durations and low yields, designed for the benefit of that smiling guy in the big corner office. There is a better way, but you have to focus on income and be willing to trade occasionally.

The larger the portfolio, the more likely it is that you will be able to buy round lots of a diversified group of bonds, preferred stocks, etc. But regardless of size, individual securities of all kinds have liquidity problems, higher risk levels than are necessary, and lower yields spaced out over inconvenient time periods. Of the traditional types listed above, only preferred stock holdings are easily added to during upward interest rate movements, and cheap to take profits on when rates fall. The downside on all of these is their callability, in best-yield-first order. Wall Street loves these securities because they command the highest possible trading costs... costs that need not be disclosed to the consumer, particularly at issue. Unit Trusts are traditional securities set to music, a tune that generally assures the investor of a higher yield than is possible through personal portfolio creation. There are several additional advantages: instant diversification, quality, and monthly cash flow that may include principal (better in rising rate markets, ya follow?), and insulation from year-end swap scams. Unfortunately, the Unit Trusts are not managed, so there are few capital gains distributions to smile about, and once all of the securities are redeemed, the party is over. Trading opportunities, the very heart and soul of successful Portfolio Management, are practically non-existent.

What if you could own common stock in companies that manage the traditional Income Securities and other recognized income producers like real estate, energy production, mortgages, etc.? Closed End Funds (CEFs), REITs, and Royalty Trusts demand your attention... and don't let the idea of "leverage" spook you. AAA + insured corporate bonds, and Utility Preferred Stocks are "leverage". The sacred 30-year Treasury Bond is "leverage". Most corporations, all governments (and most private citizens) use leverage. Without leverage, most people would be commuting to work on bicycles. Every CEF can be researched as part of your selection process to determine how much leverage is involved, and the benefits... you're not going to be happy when you realize what you've been talked out of! CEFs, and the other Investment Company securities mentioned, are managed by professionals who are not taking their direction form that mob (also mentioned earlier). They provide you the opportunity to have a properly structured portfolio with a significantly higher yield, even after the management fees that are inside.

Certainly, a REIT or Royalty Trust is more risky than a CEF comprised of Preferred Stocks or Corporate Bonds, but here you have a way to participate in the widest variety of fixed and variable income alternatives in a much more manageable form. When prices rise, profit taking is routine in a liquid market; when prices fall, you can add to your position, increasing your yield and reducing your cost basis at the same time. Now don't start to salivate about the prospect of throwing all your money into Real Estate and/or Gas and Oil Pipelines. Diversify properly as you would with any other investments, and make sure that your living expenses (actual or projected) are taken care of by the less risky CEFs in the portfolio. In bond CEFs, you can get un-leveraged portfolios, state specific and/or insured Municipal portfolios, etc. Monthly income (frequently augmented by capital gains distributions) at a level that is most often significantly better than your broker can obtain for you. I told you you'd be angry!

Another feature of Investment Company shares (and please stay away from gimmicky, passively managed, or indexed types) is somewhat surprising and difficult to explain. The price you pay for the shares frequently represents a discount from the market value of the securities contained in the managed portfolio. So instead of buying a diversified group of illiquid individual securities at a premium, you are reaping the benefit of a portfolio of (quite possibly the same) securities at a discount. Additionally, and unlike regular Mutual Funds that can issue as many shares as they like without your approval, CEFs will give you the first shot at any additional shares they intend to distribute to investors.

Stop, put down the phone. Move into these securities calmly, without taking unnecessary losses on good quality holdings, and never buy a new issue. I meant to say: absolutely never buy a new issue, for all of the usual reasons. As with individual securities, there are reasons for unusually high or low yields, like too much risk or poor management. No matter how well managed a junk bond portfolio is, it's still just junk. So do a little research and spread your dollars around the many management companies that are out there. If your advisor tells you that all of this is risky, ill-advised foolishness... well, that's Wall Street, and the baby needs shoes.

The final article in this Income Investing trilogy will be on managing the Income Portfolio using the Working Capital Model.

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