Major Rotation

Sold IWMI (2.74% Allocation)

This covered call fund is based on the Russell 2000 and these smaller companies are vulnerable to the current turmoil. They had a nice run in late 2024 when it appeared that interest rates were going to decline steadily. The future direction of interest rates is now less certain.

Sold FEPI (1.69% Allocation)

I don’t normally buy funds soon after launch unless I’m familiar with the fund manager and strategy. This was an exception and in hindsight, I should have waited. It performs well during bull markets and suffers substantial NAV erosion during bear markets. FEPI is highly volatile and therefore highly exposed to the current turmoil.

Sold AGNCN (1.98% Allocation)

This has been an excellent investment. I’m only selling it because it’s callable at $25 and the price has appreciated north of $26. That creates “call risk” meaning that an amount over $25 could be lost if the issuer decides to call (redeem) the stock for $25. For this reason, I’ve rotated into other preferred shares with prices closer to $25 listed below.

SPYI: Reduced Allocation from 4.86% to 2.43%

This is one of my favorite long term holds. Under “normal” circumstances, I would keep it at around 5% of the portfolio and ride the market bumps. However, the risk of the tariff situation is unknown, and if the market takes a prolonged tumble, the distributions will eventually fall by the same amount as the fund (ie a correction lasting more than a couple of months). 

My #1 priority when making these changes is to preserve consistent income. I don’t mind price fluctuations, but reductions in income are to be minimized. On the other hand, the S&P 500 (and NASDAQ 100), ha shown itself to be capable of navigating challenges, so I don’t want to count them out completely. 

As such, I’m reducing this position by half.

QQQI: Reduced Allocation from 4.79% to 2.39%

Same strategy as SPYI; see above.

JEPQ: Reduced Allocation from 4.97% to 2.48%

Same strategy as SPYI; see above.

Bought: DX.C (2.5% Allocation)

mREIT’s are risky but their preferred shares are far less so. This one is currently yielding approx 6.8% and will bump up to a much higher floating rate on April 15th. At current interest rates, it would equate to a yield of 10%. 

Full review of DX.C linked here.

****Note that the distribution change occurs on April 15, 2025, and will apply to the next distribution after that date; July 15, 2025. Full details and dates: https://armchairincome.link/DX.Preferred.dist.timing

Bought: UTG (3.5% Allocation)

In the past I sold this utility because it appreciated so much in price that the yield was no longer competitive. The world has changed, and 7% with low correlation to the S&P 500 is looking much more attractive than it did last year.

Bought: UTF (3.0% Allocation)

Same strategy as UTG; see above. UTG has a better distribution history (no cuts) and UTF has a better Total Return than UTG over a 5 year timeline. Both yield approx 5%, so…why choose?

Bought: NYMTI (2.72% Allocation)

This is a “Baby Bond” issued by an mREIT. It’s called “Baby” because it’s issued at a small price, $25, making it accessible for all investors. Regular corporate bonds are generally issued at prices in the range of $1,000. Once again, the mREIT is too risky for me, but their bonds are even less risky than preferred shares. In the event of bankruptcy, bond holders get paid before preferred share holders, who get paid before common stock holders.

It’s yielding just over 9%, based on a price of $25, and is currently trading just below that because it recently paid a distribution. NYMTI matures in 2029 and pays quarterly.

I haven’t produced a review of this one, but there’s an excellent overview by ADS Analytics linked here: https://armchairincome.link/NYMTI

EIC: Increased Allocation from 2.42% to 3.42%

EIC is at the riskier end of the CLO spectrum, which is why it pays such a high yield (16%). Having said that, I think the market has over reacted and pushed the price of EIC down as if it’s at extreme risk of escalating defaults. 

CLO’s default at a much lower rate than corporate bonds and at this point, I’m comfortable with the risk to reward for EIC (although JAAA is far less risky in the CLO world).

EICC: Increased Allocation from 2.49% to 3.49%

EICC is a preferred stock issued by Eagle Point Income Company (who manage EIC described above). It’s trading very close to its $25 par value and therefore has close to zero call risk. A simple 8% yield.