Someone close to me had a windfall last year and correctly realized they need to do something to try and make it last. In my advice/allocation I gave a large weighting to Pimco Income Opportunity (PKO) and feel it's a good opportunity for almost all portfolios. Pimco is one of best active managers out there, having access to them with intraday liquity available is under publicized. I like the pretty broad exposure to higher return debt markets, the 9% yield that is paid out monthly, and it's price appreciation looks to be roughly half of the downside of equity market and equal on the upside
The title of this post is learned from the school of experience and is one the most important epiphanies to have success in the money game. To further paint this picture an example: counting linear to thirty (1..2...3... etc.) takes thirty turns whereas counting in an exponential fashion (2....4.....8....etc.) thirty turns you get to a billion. Shocking indeed. Now think of a modest loss on an investment, say 10% of $10,000, to return to your original amount you need earn 11%. No sweat am I rite? To contrast if the loss was 50%, a 100% return is needed to make it back to break-even. "The most powerful force in the universe is compound growth". You know who said that? Einsten, bro (emphasis mine).
Circling back to the PIMCO product. It's yeilding 9%. On a monthly basis. What is the effect of more payout periods? It increases the rate of compounding. In a down market (2008) it out-performed the stock market by 16%. In an up market it returned 41% well over the 28% return of the average. To reiterate for effect - What would Einsten do if he was a market wizard in his day? He would tell you it's got more to do with not losing, than winning.
In my niche of this industry that's upside and downside capture that can warm hearts and win minds. And fill wallets. (yours) Seriously a great product.
disclosure/legal: i own shares. if loss of money, blame the physics professor (pictured)
