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A '4-Sleeve' Approach to Maximizing Your Income Portfolio


NEW YORK (FMD Capital Management) -- Maximizing your portfolio returns should start with a disciplined approach to structuring your asset allocation.

Oftentimes we get caught up in adding to favorite holdings or carrying too high of an allocation to a single asset class, which can be less than optimal over long periods of time. Taking a wider view of your entire portfolio can be helpful in making sure that your holdings complement each other to achieve your investment objectives.

My preferred method of structuring an income portfolio for my clients is to use "sleeves" to define fixed-income, dividend paying equities, alternative strategies and cash. You may have also heard these sleeves referred to as buckets, silos or some other term to define a similar group of securities. I certainly didn't invent this strategy, but I find it helpful to organize and define the investments in my portfolio. Then, as market conditions change, I can expand or collapse the sleeves within my portfolio to suit what I believe to be the best risk-to-reward characteristics for any given environment.


Bonds are back in vogue this year because investors have realized the potential for deflation may outweigh the risk of rising interest rates. One thing that can't be discounted is the level of income, diversification and low volatility that is needed by retirees, pensions and a host of other conservative investors that utilize fixed-income.

Right now the bond sleeve of my income portfolio has approximately a 55% allocation to a variety of exchange-traded funds and actively managed mutual funds in a number of sectors. Two of the top-performing funds that I have owned for quite some time are the Pimco Income Fund (PONDX) and Osterweis Strategic Income Fund (OSTIX).

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