PERMANENT portfolio and VARIABLE portfolio

[Don Konipol]

Permanent vs variable portfolio.  IKnow, I know, NOTHING’S permanent.  But, for practicality, I divide my portfolio of notes into two distinct portfolios.  My PERMANENT PORTFOLIO consists of notes and my participation in note syndications that are held for income, collect interest on a continuing basis, and (hopefully) get paid off at maturity without any “drama”.  In other words held for steady cash flow.

My VARIABLE (note) PORTFOLIO consists of more active/speculative notes - non performing notes I purchased at discount to principal owed; notes I hope to "work" for enhanced ROI, real property I "purchased" with a leaseback option to repurchase, and defaulted notes I purchased planning on eventually taking ownership of the real estate, as well as notes I created that don't have current payments but provide a guaranteed return plus an equity "kicker" when the property is sold.

Seems to me my “permanent note portfolio is basically a passive investment, while my variable note portfolio is somewhere between business and investment.  

Wondering is 

1- Anyone else thinks of their portfolio in a similar way

2- Anyone else see advantages (or disadvantages) of “dividing” your note portfolio into these two different arenas

3- Anyone else distinguish between “passive” investing, “active” investing, the investing “business”. 

Please share your thoughts

[Dan Deppen]

I do something similar. My PERMANENT portfolio is my SDIRA; I try to buy more solid performing notes that I won't need to work on (although they haven't all panned out that way...). In my LLC I buy more sub-performing and non-performing notes with investor money, that's my version of the VARIABLE portfolio. That side of my portfolio is most definitely a business and not passive at all.

While the note investing world is a small niche, within that world is a wide range of different investment types. You can have 2 different "note investing" models that are entirely different sports.