January ETN Portfolio Update

January was a unique and interesting month for my portfolio. Two big things happened: 1.) two of my holdings were exchanged for their Class B siblings, which I’ll explain in more detail below and 2.) I had my largest Dividend/Coupon payments ever. In this post, I’ll share more detail into my specific holdings.

First lets cover the not so fun stuff, expenses. I owed $5 for the ability to use Robinhood Gold and owed $116 in interest to Robinhood for using leverage through the billing period. At this point, my core holdings are not using this leverage. I am using Robinhood’s leverage to swing trade and to pull funds out to pay the monthly borrowing payments. I owed $394 this month to my credit cards and another $2,431 on my personal loan. In total my portfolio cost me $2,946 in January.

Now for the upside, my swing trading netted me $1,832 this month. I buy and sell ETN’s as well as some other dividend paying stocks. I never sell at a loss, never. If I get caught in a down swing in price, I simply hold and collect the dividends until the price comes back up. This has happened a few times over the last year. The hardest part about swing trading is remaining emotionless. I try to get in and get out in the same day, known as day trading. I don’t try to hit home runs where the prices goes up significantly and that’s when I cash out, but I usually set a target to make between $50-$150 per trade.

As mentioned in my second point above, I made the most I’ve ever made in a month in coupons/dividends. In January I was paid $4,497! This came from 9 ETN’s and one common stock, VET. This was one of those trades I was holding until it came back up in price so I didn’t take a loss. I was paid $300 just for holding this stock through the ex-dividend date which was the end of December. I later sold in January for a profit as well!! Of the ETN’s one of them only pays each quarter, LBDC. so every 3 months my payouts overall are bigger. Here’s a table of the income in January:

Another unique action that took place in January was an exchange of ETN’s. I had two Series A ETN’s in which UBS currently has a voluntary exchange happening. We have the option to trade our Series A ETN’s for Series B which are essentially the same notes. I was invested in CEFL & BDCL which are part of the exchange. There was a 2 day period in which my current holding were frozen while the exchange of notes was taking place. My portfolio showed a temporary $44k decline. See picture below for what my portfolio did during that exchange period.

As noted in my previous post, https://kittleinvestments.com/what-are-etns/ ETN’s are a unique asset class that needs to be watched closely. Another ETN, SMHD will be redeemed later this year. I will need to make a decision on what to do with this note in the next few months. If redeemed at the current price, I will receive $2.56 per share less than what I paid representing a $2,600 loss. I problem I now get to solve.

Stay tuned for my February ETN high leveraged portfolio update. I’ll also start posting about my peer to peer lending investments soon.

Be Awesome!

2019 Year End ETN Portfolio Results

2019 was the first year of my ETN high leverage investing strategy. Most people call me crazy/insane when I talk about what I’m doing. Keep reading to see if you feel the same. I started building my portfolio in February of 2019 with around $15K. I dabbled in 2018 with ETN’s as well as some Crypto Currencies. I didn’t have a clear set strategy though and liquidated my holdings. While I did have some funds to begin my portfolio, this is only a fraction of my total today. Of the main stream investments, Real Estate using leverage (mortgage) has been considered the only way to use OPM or Other Peoples Money. Most investors think that you need your own money to buy stocks/ETFs/ETNs in order to invest. I am proving this notion wrong.

Leverage – Other Peoples Money

I understood why Real Estate is an asset class that allows the use of other peoples money to buy investments. Having a physical asset to secure the loan makes a massive difference. But I wondered if there was a way to do something similar with high yielding ETN’s and I found 2 ways. I’m not sure where I even got the idea from, but I decided to use balance transfer promotions from credit cards with 0% interest and invest those funds in high yielding Exchange Traded Notes (ETN’s). Using what’s known as Rate Arbitrage, the idea is to make a return on the investments, while paying no interest for the use of the money. I make the minimum monthly payments on those cards by transferring funds from my brokerage account each month. I have not had to sell any of my investments yet as my brokerage, Robinhood allows for margin trading. Margin is another form of leverage through the broker. At the end of 2019, I have 3 credit cards that I’m leveraging $32K at 0% interest. All funds are in high yield ETN’s. My zero percent credit cards have paid out coupons/dividends of $1,780.57 in 2019. Eventually the full balance will be due after the promotional period. I will either sell some shares to pay off the credit cards or I will use margin from my brokerage to pay off the credit card and slowly payback the margin account with the monthly coupon/dividends. I will be following up with monthly updates on my portfolio, so keep a look out for what I decide.

Aside from my zero percent balance transfer credit cards, I also applied for an unsecured personal loan through SOFI and of course I asked for the maximum, $100K! Much to my surprise, I was approved! I was offered $100K over 4 years at 7.77%. The decision to take out this loan was tough and I debated on pulling the trigger for a week. Late in July though, I made the decision to take the funds and invest them. In 2019, I made $5,763.59 in coupon/dividends in only 5 months of payouts. I expect 2020 to be much more.

If you want to check out SOFI for a loan for yourself, you can get $100 back if you use my link. http://www.sofi.com/share/2603727

I also took advantage of Robinhood Gold which allows me to use margin, or borrow money for investing. I do pay $5 per month for this upgrade and 5% interest on the funds I use, but I’m able to have a lot more options. I used some margin to purchase $11K in ETN’s to earn additional return. Of this, $11K, I earned $1,248.47 in payments in 2019. I also did some swing/day trading on high dividend paying stocks & ETN’s. I was able to earn just over $10K in profit and dividends. I have not lost on any trade I’ve made as I follow Warren Buffets first two rules of investing. Rule 1: Do not lose money, Rule 2: see Rule #1. If what I day trade on declines in value and I can’t sell for a profit, I simply hold the asset and collect dividends, and wait to sell at a gain. My cost for Robinhood Gold was $458.21 in 2019. A small price to pay for all the gains I think.

2019 Year Summary

For 2019, I ended up investing $22,000 of my own funds, $11,000 in margin leverage, $32,000 in Credit card leverage and $100,000 from a personal loan into ETN’s. This combined is $165K invested in the market.

Total costs to me in 2019 were $4,623.22. $3,143.01 is the interest on the SOFI loan, $1,022 in credit card balance transfer fees and $458.21 for Robinhood Gold.

In total, I received $13,771.73 in coupon or dividend payments. My largest month was October with over $3,500 in payments!

Outside of the asset value change and day trading, my net income was $9,148.51

For 2020, my challenge is to continue to grow my portfolio with other peoples money. 2 of the credit cards will come due and I plan to secure more unsecured cheap credit to invest. I know the above is a lot to cover and I did not go into a lot of detail, but I will be posting regular updates every month so you can follow my journey. Please consider joining my e-mail list to be notified when I make a blog/youtube update on my investing journey.

What are ETN’s?

ETN’s or Exchange Traded Notes are investment vehicles that trade on exchanges just like other stocks or ETF’s (exchange traded funds). However, they are loans made to banks on unsecured debt securities and not backed by any specific asset. Initially, investors loan banks money, the bank turns around and invests those funds with certain investment objectives. The strategy of each fund varies, but most try to match the results of other underlining assets. Certain ETN’s aim to execute their own unique strategies to bolster investor returns. 

Unlike ETF’s though, there are no assets that directly back ETN’s. ETN’s are more like Bonds, they are issued for fixed period of time, then they mature. I have typically seen a 30 year maturity on each ETN. Unlike bonds though, there is no interest paid. However, some notes (like the ones I invest in) pay coupon payments, it helps to think of these like dividends, but dividends imply ownership in the underlining security. ETN’s do not have ownership rights.

Risks for ETN’s

Liquidity: Since ETN’s are not a popular main street investment, some have very low volumes making them difficult to trade. The issuing bank of the ETN investment can chose to shut them down at any time causing all exchange trading to stop. Typically, there are clauses established by the bank up front explaining what can trigger these events. For example, the note can specify a floor Net Asset Value (NAV) threshold. If the note falls below this value, it can trigger early redemption or suspension of trading. This results in a suddenly ill-liquid investment making them difficult to redeem. The issuer could also choose to redeem the notes early and pay out at the current net asset value. The difference of value vs. price paid at redemption will result in a gain or loss of principal.

Bank Risk: The underlining bank or entity that backs the security could in theory go under. The two banks that back the ETN’s that I trade are UBS and Credit Suisse. They have been around 157 and 163 years respectively. Values of the ETN’s could go down if the bank’s credit rating goes down. The issuing bank can also shut down the notes and move investors into new series B funds as is happening right now with UBS. This is impacting two of my holdings, CEFL & BDCL.

Fees: Like most investments, there are fees involved with ETN’s. Fees are taken out of any investment earnings before they pay the coupon payments to holders of the notes. If the underlining investments do not produce, fees could eat into the net asset value. The NAV should be similar to the price of the traded notes.

Options & Leverage: The banks may use options or trade with leverage to achieve performance. This inherently increases the risk of performance. Options are short term bets on the price movement and if wrong, could result in significant losses. Leverage enhances both wins and losses.

Benefits

Potential Tax benefits: Some claim there are tax benefits for ETN’s, however this is a broad statement that does not apply to all different types. Since there are no underlining assets owned, they cannot distribute capital gains. There are some ETN’s, like the ones I own, that do pay regular coupon payments. These are taxed like dividends.

No Tracking Errors: Unlike ETF’s, ETN’s can provide an exact tracking to the index they aim to track. Since there is no direct ownership in the assets making up the index, there are no tracking errors to the index. ETN’s use other means to produce the same results of the tracked index.

Leveraged Returns: See the next section below regarding my portfolio for this major benefit.

My Portfolio

I have found a subset of ETN’s that are 2x leveraged that make monthly, bi-monthly or quarterly coupon payments. This is the bulk of my portfolio. All but three of my ETN’s are 2x leveraged which means the yields are higher than the indexes they track. They are also much more volatile. My core strategy is long term buy and hold seeking the cash flow these assets produce. My group of 10 ETN’s are yielding between 7.5% & 19% right now. While 7 of my ETN’s are 2x leveraged and pay coupons, I have diversified into some commodities to hedge myself to some degree.

I fully acknowledge that my portfolio of holdings are speculative and have many risks that is not for the novice investor. Having a clearly defined strategy and staying with it has been a key pillar to my success so far. In future blog posts, I will go into more of my strategy as I share my portfolio over time. I have seen the market drop a few times in the last year causing my portfolio to drop by 11+% within a 2 week period. This is to be expected along with the major gains.

To receive updates on my roller coaster riding portfolio, sign up for my e-mail list and Subscribe to my YouTube channel. As always, Be Awesome!!

My First YouTube Video

My very first video has been posted to YouTube today. Although it’s less than 90 seconds, it’s one of the hardest things I’ve done thus far for this new en-devour. I’m terrified of the camera and how I look and what others may think about me. But one thing I know, is that usually the hardest things to do are the ones that have the biggest payoffs in the future. I was right, right after editing and posting the short clip, I felt a huge sigh of relief and much more confidence in what I’m doing here. Impostor syndrome is real, very real. It’s hard to always Be Awesome.

Without further adieu, here is my introduction YouTube video. I plan on sharing on a regular basis many different topics. Subscribe to my channel and turn the notification bell on to be one of the first to see my latest and greatest. I promise, my video quality will improve as I go.

A little more about Kittle Investments

Kittle Investments is a company I’ve started out of my passion for investments and financial education. While working in corporate America, I was in a very unique position where I was in-between roles. This left me with lots of time to think and take stock of my life. I asked myself, At this stage in my life, am I truly happy with where I’m at? While we have a lot, the answer was clearly no. I’ve always had an entrepreneurial spirit and working in corporate america was killing it.

I knew I wanted to do something, but what? I looked deep into myself and asked, what do I enjoy doing? As strange as it sounds to most, I loved doing personal finance. Weekly tracking of expenses, creating a balance sheet for our family to track our net worth and looking for higher returns on investments (ROI). While watching other Youtube channels and reading blogs on the same topics, I thought my can’t that be me? I have always received the most joy when I help others with their personal finances and investments. I get very excited and can talk for hours on end. Over the years co-workers, friends and family members have asked for advise and my thoughts and I love it.

Kittle Investments is my outlet to help as many people as possible through this blog and my Youtube channel. And yes, I hope to earn some money along the way.

Here are some of the specific things I’ll be writing and talking about:
1.) Basic Personal Finance – how we manage our family of 4
2.) ETN Investment portfolio – I’ll show what I’m doing on the Robinhood platform. Sign up now on this free investing platform and you’ll get a free stock!
3.) Real Estate Investing
4.) Note Investing – Peer to peer and private money lending
5.) Dividend Investing – I’ll write and talk about our brand new SoFi investment accounts for my kids, another free platform. Sign up now for an Active Investing account and you’ll receive $25 to trade with.
6.) Loans – Personal, Student Loans & Refinancing. I have a personal loan with SoFi and has been one of the best experiences with a financial institution. Sign up Here for a student loan refinance or a personal loan and you’ll receive $100 upon loan funding.

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