Portfolio , Retirement


Happy New Year everyone! I hope you had a great 2010 and wish you all the best in 2011.

For my first post of the year I wanted to review my 2010 results and highlight a few real successes and of course some bad trades as well. Lets get right to it.

My total portfolio return for the year was 18%. And even more important for a retiree like me, total return ex spending (all living expenses for the year) was 13.5%. Take that 4% rule! Just kidding. Total spending was higher than budgeted for the year but not too far off target. It was a great year for markets by most measures with the S&P500 up 14.6% , the bond index AGG up 6.4%, and the classic 60/40 retiree portfolio up 8.8%. Now, lets breakdown my performance a bit more.

The stock portion of my portfolio (45% allocation for 2010) returned over 30%. Returns we primarily driven by the performance of my MLP investments with my largest holding EPD returning over 40% in 2010. Even the other two large MLP holdings, ETP and KMP returned over 20% each. I definitely do not expect another repeat of 2010 for MLPs but they should still return over 10% in 2011 (more in another post). My two worst decisions in 2010 were PBCT, a small regional bank, and SD, a small oil and gas E&P company. PBCT is a nice dividend payer but no real catalyst for growth.  I lost about 12%. I got out for better dividend paying opportunities elsewhere with growth. SD was a small speculative buy in the oil and gas sector that was deeply undervalued. I caught the falling knife a bit and hit my stop loss before the stock turned around but that’s life. I lost about 20%. I also diversified my dividend portfolio some more with investments in NLY, CIM, and NGG which were all up over 15% even though I held them less than 1 year. I also initiated a large position in a stealth dividend stock, FFH. I’ll discuss my current holdings some more in a 2011 outlook post coming soon.

Commodities and currencies (23% of my allocation in 2010) also did well being up 12% in 2010. I own my commodities through a structured product that tracks the Rogers commodity index. My currency investment is also a structured product that tracks some of the big BRIC currencies. This is the area of my portfolio that I’m most concerned about going into 2011 and I’m currently reviewing alternatives for this segment.

My cash investments (15% of my allocation) also did pretty well for such liquid investments. The return was about 5% and came mainly through my generating of income through option selling. I didn’t really scale up my option selling until the last half of the year. I hope to generate more of my living expenses through this strategy in 2011 so I can let the rest of my investments ride.

All in all I’m quite pleased with the results for 2010. I learned some good lessons, and more importantly for me, refined my investment process more to enable me to make better decisions. In the next couple of posts I’ll tackle some 2011 views.

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4 thoughts on “ 2010 in review

  1. Found your blog through Seeking Alpha (KMP) and very much agree with your investment philosophy. Thank you for you selfless sharing of your experiences and knowledge. I would add that in my 30 years of experience I also put great emphasis on how much “skin” the owners of the company have invested in the company. This criteria led me to EPD and KMP…It has also led me to SDRL. This company fits into your investment thesis and is my way of thanking you for allowing us to enjoy your blog

    1. Hey Bob, your most welcome and thanks for the tip on SDRL. I’ll check them out. I agree that owner skin in the game is a huge positive factor. I was quite sad to see Dan Duncan pass away last year. He really did some amazing things at EPD and always looked out for shareholders. The new chairman Mike Creel seems to be continuing his legacy. I hope he truly is cut from the same cloth.


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