November ReportJuly 2014, was another great month of positive performance for my arbitrage income portfolio.

As you already known I share my results with you mainly for three reasons:

  • The Benefit of Full Disclosure
  • Share the Knowledge
  • Track Performance

 Because “no one should talk about investing, if they are not willing to show their actual holdings and performance.”

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The problem with not knowing how to invest outside your 401Ks and IRAs is that you are trapping your money inside a cage you cannot touch until you reach 65 years of age.  What is the point of saving and working hard if we then are too old to enjoy ourselves?  See the problem with the rat race is that even if we win it we are still rats.  The solution for this is knowing how to invest for the present and not for the future.  Having a regular investment account (brokerage) on top of that Roth IRA or similar traditional retirement accounts is crucial.

Why invest on regular retirement accounts like 401Ks and IRAs when they do not longer work?

According to J.P. Morgan Asset Management in their work title Breaking the 4% Rule.  The usual way of saving and investing predicting 8% returns on investment, based on the traditional approach of diversification and dollar cost average is broken.  Utilizing the 4% rule is longer viable.


jp morgan 4 rule



As you can see due to investor behavior and current market cycles if you continue to follow the classical allocation of investing 30/70 bonds-stocks in a portfolio you most likely will outlive your money.

Worse than being a useless way of investing the bigger problem are the fees, the high costs involved with investing in the traditional way.

According to Rebalance IRA the annual fees of hiring a financial advisor to manage your money can cost you more than 29.6% of your investment returns over a period of 10 years.

fees rebalance ira

This will be more than $60,138.38 for an initial investment capital of $100,000, given 6.39% returns, at expense ratio of 0.71%, over a period of 30 years.  I do not how you feel about this but I will hate to pay over 60k in a loser’s strategy that do not longer pays.

The old way versus the new way, retiring at 35 instead of 65.

In 2014, if you wanted to max out your Roth IRA contributions you will need $5,500 a year or $458.33 calculated monthly.  The same for 401K if you want to max it out you will need $17,500 or $1,458.33 calculated monthly.  This is a total of $1,916.66 of negative monthly cash flow because all that money will be freeze until you are 65 years old.

frozen 65

However, will this be enough to retire?  Is it worth it to wait until 65?  Imagining that you, will only $5,000 a month to live on happily.  Given a typical market average yield of 2%, you will need a portfolio worth more than $2,950,000.  The same way if utilizing the rule of 4% for your portfolio you will need over $1,500,000.  In the other hand if we invest like Warren Buffet, on preferred shares of Bank of America, Goldman Sachs or any other yielding assets of over 8% you will only need a portfolio valued at $750,000.

2 4 8 capital

Given the past scenario I decided to create a step by step system (one that I personally use to invest all assets) that will teach you how to invest in regular investment brokerage accounts that are not subject to the 65 years freeze and that it will cut your retirement age on half by more than 15 years.  While being immune to the broken 4% rule.  See how the cash flows compare with the traditional 401k approach.


non 401k

Having $233,000 of initial investment capital on a certificate of deposit with a rate of 3.25% will return you $640.53 monthly.  A loan with a borrowing rate of 6.5% will cost you $2,029.68 a month.  However, investing this new free capital of the loan (another $233,000 working for you at a  yield of 8%) in preferred stocks will give a $1,611.57 in monthly dividend.  For a final and free monthly positive cash flow of $222.42  ($2,252.10 – $2,029.68).

ais results


Finally, that is a 222% return on investment given the investing conditions of $233,000 of initial capital, preferred returns of 8%, borrowing rates of 6.5% and saving rates of 3.25%.  Money that you can begin to use today or 15 years later, not having to wait until 65 to touch it.




Half Year ReportFour and half years ago when I discover the secret of arbitrage, I decided to first apply it to my retirement income portfolio (Roth IRA) but in a unique way because as a student of the markets and industrial engineer myself. I have a particular way of thinking when it comes to income investing. Today I am going to share with you my results, holdings and performance for my Roth IRA as June 2014.


“Risk comes from not knowing what you’re doing.” – Warren Buffett [Read More…]