Monthly Performance Report for
Net Current Yield
Yield and Return
- Snider Method Yield
- Snider Method Return
- S&P 500 Return
|Yield Summary||Year to Date|
|Interest & Dividends|
|Net Current Yield|
|Contributions/Distributions This Month|
|Cumulative Net Current Yield|
The market value of all the securities in your portfolio plus the cash.
Asset management fees that you incurred, but haven't been billed yet.
The Net Current Yield as an annualized percentage of your Stake. Obtained by taking your Net Current Yield for the month, dividing it by your Stake for the month and multiplying the number by 12.
The purchase price of all the securities in your portfolio plus the cash.
Fees the broker charges to take your stock and option orders to the market.
The difference between the purchase price and sale price of your stock once the position is closed.
Cumulative Net Current Yield
The sum of each month's Net Current Yield since Snider Advisors began managing your account.
Interest & Dividends
Interest earned from cash in the account (or margin interest charged by the broker if the account is in margin). Plus dividends paid as a result of owning specific stocks.
Net Current Yield
The income from option premiums, interest and dividends, plus the realized gain (or minus the realized loss) from stocks in all closed positions, minus commissions paid for stock and option transactions and management fees. This amount does not equal your taxable income.
All your deposits to the accounts managed by Snider Advisors minus any withdrawals you have made from these accounts. If you pay your fees directly to Snider Advisors, these fees are considered contributions to your account.
The cash derived from the sale of options expiring in October 2008. These options were sold in the previous Trade Day.
Your initial investment plus any subsequent investments and minus any withdrawals, plus interest and dividends, plus the profit from any closed position, minus asset management fees. Commissions reduce the profit from closed positions.
The amount of income you need to show on your tax return (for taxable accounts). This is calculated using different rules than the Current Yield.
Unrealized Loss (or Gain)
The difference between the purchase price of a security and the price you could get by liquidating the security.
|Jesse Anderson, CFA|
The Fine Print
The yield calculation is different than the return calculation shown by most investment advisors. The yield is approximately equal to the total return if and when a position closes. While the position is open, there is typically some amount of unrealized loss. The total return measurement would include these losses and so would be lower than the yield. The rules of the Snider Investment Method prohibit selling stocks at a loss, but this does not limit or prevent the accumulation of unrealized losses which are not included in the yield calculation. These unrealized losses could persist indefinitely and may never be reflected in your net current yield.
The yield includes option premiums, interest, dividends, and realized gains or losses from closed positions, but excludes unrealized gains or losses from open positions. Brokerage commissions are deducted before calculating both the gross and net yield. The net yield has the asset management fees deducted. The percentage yield is the yield for the month divided by the stake multiplied by 12. The stake is all contributions minus withdrawals, plus the profits or minus the losses from any closed positions. For a complete discussion of the calculation of yield, please see the Performance Discussion page on our website.
The yield figures are unaudited and are subject to change. The information contained herein is current as of the date hereof, but may become outdated or subsequently may change. Past performance is no predictor of future results. All investments involve risk, including possible loss of principal.
Please Update Asset Management Agreement
We recently added a new electronic contract tool to our website to capture your signature and store all our contracts. It will allow us to keep your contract language consistent across all levels of service and quickly provide notifications of updates to your agreement.
Most of our agreements date back to when you originally signed up for Asset Management services. That means for some clients it was done on paper back in 2002! Due to rule changes, recommendations from compliance consultants, and best practice recommendations from regulators, we've made many slight adjustments to the contract to keep it up-to-date. In combination with some language adjustments and our new electronic contract tool, we are asking you to update your agreement. You can follow this link to complete the process.
Keep in mind, there are NO changes in the fees or terms of your service.
If your profile and suitability information is out of date, you will also be asked to provide any updates. As an SEC-registered investment advisor, we are required to know our client and receive regular updates about their financial situation and investment objectives.
Thank you in advance for your prompt attention to this matter. And of course, we truly appreciate your business and on-going support.Update Agreement
If you tell the story of 2018, it will consist of two parts. The first three quarters of the year charged forward, set all-time highs, and extended the bull market. However, that all changed in October as the last three months of the year saw consecutive declines with indexes nearing or entering a bear market depending on which one you track. The turmoil to end the year is freshest in our minds, but let's begin by taking stock in the first part of the story.
If you went back to my 2017 year-end note, you would see I mentioned 2018 got off to a good start. About the time we published that message, the market had gained over 7% in just the first few weeks of the year, and things felt pretty good. However, not long after, the market quickly dropped over 10% in only a few weeks. At that time, everyone was asking if this was the bear market people had been expecting for many years.
From January 2018’s Trade Day through February 2018 expiration, the market had some huge daily swings. This was the start of the volatility that lasted throughout 2018. As option sellers, volatility is excellent for premiums. 2017 was one of the least volatile years on record, but that was not the case last year. The big day-to-day swings will wreak havoc on our nerves, but present good buying opportunities and lucrative option income for cash flow investors like us.
The market struggled to find any direction for a couple of months before starting a consistent upward trend in mid to late April. From then through the end of September, it was hard to find any negatives. In July, our portfolio had the highest Monthly Net Current Yield in over two years, and in August the bull market that started back in 2009 during the financial crisis became the longest in history. The third quarter marked our best for income in over a decade. A good market, more volatility, and higher interest rates all contributed to a great quarter.
Right after the third quarter ended, the direction of the market changed, and we started to see more declines than gains. Some days saw very steep drops. October, November, and December all finished lower than the previous month with the steepest declines coming in December on Christmas Eve.
After two consecutive monthly declines and a terrible start to December, we prepared for December’s Trade Day which fell on Christmas Eve. I’d be lying if I told you I was excited to buy more shares of stock that morning. It was made worse by the fact that the market opened lower and finished the day down nearly 3%. As my lizard brain screamed to find safety, we approached Trade Day just like we have for the past 15+ years applying the rules of the Snider Investment Method we had seen successful so often. That turned out to be a great decision as Christmas Eve was the most recent low and the market has made big gains since then.
I made a rare prediction in my December note and predicted a bounce after the significant sell-off. Now, a month later, that looks to be correct at least in the short-term. How things will play out over the next few months may be more difficult to predict. If we get some answers on a trade deal with China, interest rates, and the government shutdown, we could quickly return to good times. As these things stretch on longer and longer, more uncertainty creeps into the market. At the end of the day, there will always be some type of 'crazy' going on. That is why it is essential to have a consistent approach to handle both the ups and downs.
While the markets declined last quarter, our annualized net income ranged from 5.5% to 7% on average. I’m sure we would all love if that were even more, but we are in a much better position than the typical buy and hold investors simply waiting to see their security prices increase. We all get concerned when markets decline, but you should be confident that you have chosen a strategy equipped to handle declines with a proven approach to generate income in bear markets.
I’ve talked to many clients after they opened their 4th quarter statement from Interactive Brokers. Of course, there was significant concern over the steep declines in their account value. Declines like we’ve experienced recently cause us all to be fearful and look for ways to stop the losses or reduce the pain. It is this exact reaction which caused us to shift our focus to income and design a strategy that wouldn’t be impacted by emotions.
In what seemed like a blink of an eye, all stock market investors found their portfolios worth significantly less than just a few months ago. This is the first big drop in a long time and is a reminder that stocks can and will decline at times. That doesn’t make them bad investments. It simply means we need to be prepared both emotionally and strategically for these drops.
Emotional reactions to swings in the market consistently cause investors to make the wrong decisions. Although having cash feels best, these are opportunities to purchase shares at a much lower price than just a few months ago. This is precisely how the Snider Method works. As markets decline, we are buying additional shares to both earn income and lower our average cost to take advantage of reversals when the market returns to moving ahead.
It is common for investors to feel more discomfort from poor conditions than excitement from gains. A big daily drop, scary headline, or bad report will weigh more heavily on our minds than good news. However, taking a step back and looking at it on a larger scale, for our retired clients the Snider Method was able to provide another year of consistent income and fund the retirement you worked hard to achieve. For our growth investors who may be one year closer to retirement, your income was reinvested in your Stake so that you can have a larger retirement paycheck when that time comes. As time passes, good and bad times blend together. And, as some of our oldest clients have shared with me, you will gain confidence that you have a solid investment approach to last a lifetime.
With 2018 behind us, that means all of us will be working on taxes during the next few months. As usual, we will email out your tax documents from Interactive Brokers as soon as they are available and we’ve verified their accuracy. Retirement account holders with a distribution in 2018 can expect to receive their 1099-R in early February. Taxable account holders will receive their documents in late February or early March. As always, if you or your tax preparer have any questions, we will be happy to assist.
I’m sad that 2018 ended on a low note because a majority of the year was very good. It is hard not too, but I hope you don’t get discouraged. It can be amazing how fast markets will move. Since the lows on December 24th, we have already made a lot of progress recovering some of those unrealized losses. Staying focused on the long-term and consistently applying the system that has been successful through both good and bad markets will allow us to prosper.
If you have any questions or concerns about your account, please don’t hesitate to contact me. Part of my role as your advisor is to ease those concerns and instill the confidence we all need to be investors. Whether it is a phone call, email, or face-to-face discussion, I’m always happy to review your account.
Thank you for your business and continue confidence.