Recap: In my fifth month (February) I had my fifth consecutive record-setting month of option trading profits, posting up $199 and increasing the principal in my trading account to $3,964.77. In total, I had paid a total of $293.33 extra principal towards the mortgage, which will equal a total savings of $450 over the life of the loan. In total across my four diversified strategies, I had earned a return of $999.43 on my $3,656.84 total investment, which is 27.7% or a CAGR of 78.6%. Read my initial post for a background on this strategy.
I missed the March updated post and, at the risk of falling too far behind, I’m going to update on both March and April in this post. I will skip the positions and trades piece of the post as that takes the most time to create.
March was another killer month with a $232.90 in profits, which was a 5.7% return on principal. Account principal stood at $4,102.97 at the end of the month. April was much more modest at just $72.65, a 1.7% return. This was still enough to cover my 1% goal to paying down mortgage principal. My principal in the account at the conclusion of April is at $4,186.37.
Extra Mortgage Principal Paid
In March, my 1% withdrawal towards the mortgage was $40 (1% of $3,964.77 rounded up to $4,000). I received $1.71 in preferred stock dividends, so $41.71 was applied to the mortgage.
In April, my 1% withdrawal is $42, plus $.41 in preferred stock dividends, totaling $42.41.
After April’s payment, I will have paid $377.45 over seven months, which will equal $576.80 of interest savings over the life of the loan.
My first passive alternative to directly paying off my mortgage principal is preferred stock. At the end of April, my preferred stock portfolio for this mortgage pay off strategy is worth $270.08 and consisted of nine different positions. I purchased three preferred stocks in March (none in April), totaling $68.77. Here are my current holdings:
- CDR-C, 6.5% coupon with a yield on cost of 7.39%
- GLOP-A, 8.63% coupon with a yield on cost of 10.45%
- NRZ-A, 7.5% coupon with a yield on cost of 8.07%
- NRZ-B, 7.125% coupon with a yield on cost of 7.95%
- PEB-C, 6.5% coupon with a yield on cost of 6.95%
- PFFA (2.007 shares, Preferred ETF),
- PMT-B, 8% coupon with a yield on cost of 8.08%
- SCE-J (2 shares), 5.375% coupon with a yield on cost of 5.57%
Hedgefundie’s Excellent Adventure
This strategy is purely for capital growth. The target allocation is 55% UPRO/45% TMF, which are both 3x leveraged ETFs. Once their value is enough to reduce my mortgage term by one month, I will put it all towards the mortgage and start over. My current balance is quite skewed towards UPRO at 65.3%, but I just don’t feel good about buying more of a leveraged longterm US treasury fund with the threat of increasing interest rates. Instead, I have chosen to make future buys at 50/50. In April I bought $4 of UPRO and $4 of TMF. My excellent adventure is now valued at $142.61, which is a positive return of 8.9%. To reduce my mortgage by one month I would need to make a $491 payment. I would like to reach that point before the end of the year, but will need some bigger months in the future to make that happen.
In my introduction post I identified three different benchmarks I will be comparing my performance to. Benchmark #1 is putting all of my savings from my refinance, plus a 1 month skipped mortgage payment, into a savings account. When I wrote that post I was actually getting 0.6% APY, but it has reduced twice down to just 0.3% now. Benchmark #2 is putting all of those savings straight into extra monthly payments to the mortgage principal. Finally, Benchmark #3 is simply buying $SPY.
After 7 months I have invested $3,985.26 (initial $3,000 + $164.21 per month). Benchmark #1 is at $3,992.40, Benchmark #2 is at $4,038.88, Benchmark #3 is at $4,693.75. My actual total is at $5,229.91. Total return is now at $1,244.65, or 31.2% (59.4% CAGR). My returns include the value of my principal in my trading account + the monthly contribution of $64.21 and interest into my savings + the difference between the original loan and what is actually remaining this month. My results are beating Benchmark #1 by 31%, #2 by 29.5% and #3 by 11.4%.