Investment Grade Value Stock Index (IGVSI)
By Steve Selengut
Professional Investment Portfolio Manager since
BA Business, Gettysburg College; MBA Professional Management
Johns Island, SC, U.S.A.
Sanserve [at] aol . com
The Investment Grade Value Stock Index is a barometer of a small
but elite sector of the stock market. Some Investment Grade Value
Stocks are included in all averages and indices, but even the Dow
Jones Industrial Average includes several issues that are below
Investment Grade and very few boast an A+ S & P rating.
The IGVSI tracks a portfolio of approximately 400 stocks - and
less than half of them are likely to be found in the S & P 500
average. This new market index was developed in late 2007 to provide
a benchmark for the equity portion of investment portfolios managed
without open-end mutual funds, index funds, or any of the other
popular speculations and hedges that are included in most professionally
Two related indices (the WCMSI and WCMSM) track portfolios of closed-end
income funds. Between the three, they serve as an excellent performance
expectation development tool for investment portfolios managed according
to the disciplines of the Working Capital Model (WCM). Through July
31 2009, these indices soared approximately 24% - about five times
the growth of the S & P 500 and twelve times that of the DJIA.
The reasons are fairly simple: A diversified portfolio of high
quality, dividend-paying equities, combined with an equally well
diversified collection of conservative interest paying securities
is what investors move into after licking their wounds from failed
Indices that contain the highest quality, dividend paying equities
and a variety of historically solid income producers in a manner
similar to a conservative personalized portfolio are valuable in
helping investors "fine tune" their portfolio performance
expectations and their forward-going action plans. The IGVSI is
telling us several things right now:
There should be profits in your portfolios so make certain you
don't let any of them slip through your fingers.
Sticking with the QDI (quality, diversification, and income production)
safety structure clearly moves you away from market bottoms more
quickly than approaches that are based on more speculative methodologies,
gimmicks, and hedges. It also puts the brakes on slip-sliding-away
market values much sooner than the conventional sell everything
Clearly, adding dollars to portfolios during corrections (portfolio
income plus regular contributions) is a far more productive approach
to investing than loss taking and waiting for Wall Street to tell
you when the next upturn is about to begin. Just ask yourself: Have
I benefited twenty-plus percent from this five-month rally?
Additionally, individual securities portfolios are much easier
to manage and to monitor as to monthly income production than other
forms of investing in times of financial chaos. Income produced
by the twenty-five closed end income producers in the WCMSI is pretty
much the same now as it was when the downturn began in May of 2007
- particularly when you factor in profits and reinvestment of dividends.
Without a doubt, investment portfolios that are able to use the
IGVSI, WCMSI, and the WCMSM as their benchmarks are most likely
to out-perform the most well known Wall Street benchmarks. They
have done so in an environment where congress has killed major institutions
and where many interest rate sensitive securities failed to move
higher in the face of the lowest interest rates in modern history.
It's time to move away from the speculative underbelly of investing;
it's time to build an investment future on a foundation of quality,
diversification, and income.
Professional Portfolio Management since 1979
Author: The Brainwashing of the American Investor
Investment Instruction provided through Kiawah Golf Investment Seminars
Published - January 2010