Note Yield Question

[Eduard Gibert Renart]

Hi All,

I want to get started buying notes and wanted to compare apple with apples. I have been running some hypothetical use cases and been comparing the returns with more traditional investment assets, and there must be something that I'm doing wrong because it doesn't add up for me.

Scenario 1 - 9.5% Yield vs Stock at 6%:

 5 year 12k note with 9.5% Yield, this means 60 payments of 252.02 for an end valance of $15,121.2 which gives me an annualized return of 4.73%. Now if I compare this to the stock market, for this case we start with 12k also but this time our investment give us a 6% return every year for 5 years. In this scenario the end balance is $16,058.71. Even thought the stock market gave us a 6% return it still outperformed the note by $937.51. 

Scenario 2 - 9.5% Yield (Multiple notes) vs Stock at 6%:

For this scenario we are going to use the same numbers as above the only difference we are going to be buying a new note with all of the money we get after ever year.

Year 0 - 12k to buy the note

Year 1 - We have 3024.24 (252.02 * 12)

Year 1 - We buy a second note 3024.24 at 9.5% for 4 years -- 48 payments of $75.98.

Year 2 - 3024.24 (1st note) + 911.76 (75.98 * 12 -- 2nd note)

Year 2 - We buy a third note 3936 at 9.5% for 3 years -- 36 payments of $126.08.

Year 3 - 3024.24 (1st note) + 911.76 ( 2nd note) + 1512.96 (126.08 * 12 -- 3rd note)

Year 3 - We buy a fourth note 5,448.96 at 9.5% for 2 years -- 24 payments of $250.19.

Year 4 - 3024.24 (1st note) + 911.76 ( 2nd note) + 1512.96 (3rd note) + 3002.28 (250.19 * 12 -- 4th note)

Year 4 - We buy a fifth note and final 8,451,24 at 9.5% for 1 year -- 12 payments of $741.03.

Year 5 - 3024.24 (1st note) + 911.76 ( 2nd note) + 1512.96 (3rd note) + 3002.28 (4th note) + 8,892.36 (741.03 * 12 -- 5th note).

Total: $17,343.6 

While this second scenario does outperform the 6% stock market return, it only give you a 7.64% annualized return while is better, if we implement scenario 2 in a self directed IRA where lets assume they charge you $150 every time you buy a new asset that would technically be $750 less of profit giving you a profit of $16,593.6 and a 6.7% annualized return.

I feel like my math is not correct or I'm missing something otherwise, can someone explain why even thought the note has a yield of 9.5% is performing slightly better than a 6% stock market return? How can I increase the annualize return? 

Thank you for the help