Learn about Mortgage Backed Securities, Real Estate Investment Trusts, and Master Limited Partnerships

These three are also considered “dividend” paying securities.

So, what are they?

Mortgage Backed Securities (“MBS”) – Exactly what they sound like. You buy some MBS shares and the mortgages paid by homeowners pay the interest. That is, until they don’t.

house for sale

At that point Investment Banks like Goldman Sachs that own tons of these things start selling them to their customers as fast as they can. When the music stops it’s the individual investor that eats mud pie instead of them. And yes, this happened in 2008. Goldman was indicted and fined for doing exactly this. So were many of the other major Wall Street Banks.

When the next recession hits, you can expect overly stressed homeowners to stop paying on their mortgages, just like last time. You probably already guessed the problem – no principal protection.

Real Estate Investment Trusts (“REITS”) – Basically, these are companies that invest in real estate of different types or in mortgages of different types.


Without getting too complex, they can pay a really nice dividend (5% – 12%) but they come with risks that are sort of a cross between corporate bonds and mortgage backed securities. They can work well over time if you buy the right company, or even a basket of REITS in the form of a REIT ETF, but is your principal protected? Nope.

And that can be a problem come recession time.

Master Limited Partnerships (“MLPs”) – Most MLP’s are in the energy industry and own the infrastructure that oil, natural gas and other energy industry products move through meaning pipelines, etc. In this respect, a lot of planners look at MLPs as tollbooths on the energy industry and in many respects they are right.


So where are the problems?

Building and maintaining that infrastructure can be pretty expensive. As a result, MLPs borrow a LOT of money to maintain and increase their capacity. This works great until commodity prices crash. If your money is in a poorly managed MLP and oil stays low for more than a year or two, your principal could face some serious risks as the MLP struggles to pay it’s debt load. If their debt is too high, that MLP may start drifting towards insolvency.

There are positives in MLPs which aren’t present in other types of dividend securities. Namely, the dividends paid by MLPs aren’t legally viewed as dividends by the IRS until your original investment has been completely repaid. Up to that point, it’s considered a tax free “return of capital.”

Sounds pretty good, right? And it can be. But the income isn’t guaranteed, and your investment is still at risk. Dividend Payers like MBS, REITs, & MLPs can fit well into a retirement plan, but the question is does it fit YOUR retirement?

It’s a pretty important question to answer.

Talking with one of our experts can help.

Questions? Ask a question with the contact button or the form at the top right.


Need some help to see if MBS, REITs or MLPs are good solutions for you?  CLICK HERE to have a planner do a comparison to see how to best meet your retirement needs and investment goals.

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Investment Management

For ACI, investment management begins with understanding and actively managing risk for our clients and partners.  We do this through smarter investments built on low cost, highly liquid and diversified investments rather than expensive financial products.


Understanding the needs of investors seeking stable results for portfolios greater than $500,000 is a core strength of ACI.  One of the most important things we do is help your investments to create stable income while generating sufficient growth to meet your future demands and the needs of those you care for. 

ACI uses customized planning and software to create retirement income plans to meet the specific needs of each of clients while providing confidence, flexibility, and cost efficiency.


Success in any endeavor comes from hard work, vision, and planning. We can help you create a more confident future by working with you, your CPA, your tax and estate counsel to make sure that when the tomorrow becomes today, you are where you want to be.

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Market Income

This portfolio invests in a basket of highly liquid Index or Sector securities and sells off atypical returns in exchange for a premium on a rolling basis. That’s a fancy way of saying we take the bird in hand and let someone else have the two in the bush.  We buy sectors that are undervalued relative to the rest of the market or vs. their historical value ranges which reduces downside risk vs. the broad market.  Typically out-performs in bear markets, neutral markets and mild bull markets, and under-performs strong bull markets.

Core Equity

Invests in diversified components of the financial markets and broad economy by targeting sectors which demonstrate the greatest potential for a consistent range of multi-year returns, while offering a risk adjusted investment profile equal to or lower than the broad markets.  Our research tells us which sectors demonstrate the greatest potential for consistent multi-year returns while offering greater risk efficiency than the broad markets.  We invest on an “Outcome Oriented” basis – meaning we have a good idea what the returns over time will be at a given purchase price.

Durable Opportunities

This portfolio invests in companies possessing a Durable Competitive Advantage.  Such companies are likely to be around for decades, easing the concern of principal return.  DCA companies often suffer less in bear markets and usually lead recoveries.  These companies allow ACI to build portfolios with minimum expected returns that can be in the mid-single digit range over any 3-5 year period which can provide long term stability partnered with long term growth in equity.

Full Cycle

This portfolio is derived from the ground breaking work in ‘risk parity’ by Ray Dalio, arguably one of the top 10 money managers in history and founder of Bridgewater Associates.  The Full Cycle portfolio is built on the allocation models Ray designed to provide the highest potential risk adjusted returns possible through all phases of the economic cycle.  Bridgewater’s “All Weather” fund was designed for pension funds and other large institutional investors that needed to earn stable returns with stable risk, and has been closed to new investors for years.  At the time the fund closed, the All Weather Portfolio had a minimum required investment of $100 million.

Equity Builder

This is a risk management overlay which helps build and protect accounts by collecting small premiums against held positions on an opportunistic basis during correcting markets through synthetic “short” positions.  EQB seeks to collect an extra 2% – 5% per year against the cost of underlying investments.  While primarily targeted at increasing account equity, EQB gives an extra layer of protection to capital during periods of higher volatility.

Fixed Income

Diversified, broad exposure to fixed income ETFs and best of breed no load funds including core fixed income components such as Government, Corporate or MBS, municipals, and unconstrained “Go Anywhere” funds.

Investment Team


Dak Hartsock; Investment manager with over 15 years of experience with securities & securities options. Dak has worked full time in the financial markets since 2007. He has more than a decade of operating experience as a business owner & developer. He is a graduate of the University of Virginia.

Robert Hartsock; MBA. Bob has over 30 years of senior management experience in diverse markets, products and businesses. He brings an exceptional record that includes management roles in two Fortune 500 companies and leadership of 7,500+ employees. Bob’s career features a specialization in identifying and fixing management and operational problems for multiple companies including leading over a dozen acquisitions, private placements and a public offering. He is uniquely positioned to provide ACI with highly relevant C-Level management perspective. Bob provides operational & macro perspective on investments ACI undertakes for client portfolios. Bob holds degrees from University of Illinois and University of Washington.

Process Portfolios is a dba of ACI Wealth Advisors, LLC.

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