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Warren Buffett Hates Bonds, Loves Cash
- Warren Buffett is sitting on his largest cash pile, ever. Warren has a very big chest, war chest that is.
- Warren chooses cash over bonds for the obvious reason that cash is liquid and available. It's dry power that he can quickly fire.
- What can we learn from Warren Buffett and his Berkshire Hathaway Funds sitting on cash for a couple of years, not finding much that is investment-worthy?
- Warren Buffett looks at cash differently than would you and I; to Mr. Buffett cash is a call option that can be priced.
The Same Returns With Half The Risk?
- I created and hold a very low beta portfolio that I have transposed to U.S. holdings.
- With the return of very modest volatility that portfolio mix has outperformed the broader markets in 2014.
- Are we again in a scenario where the balanced portfolios will potentially outperform the all-stock portfolios over the next several years?
- In the scenario of a market correction, the best risk adjusted returns may come from a prudent mix of stocks, bonds and cash.
How Dividends Don't Matter In Retirement; A Few Examples
- Recently I wrote an article entitled Dividends Don't Matter In Retirement Either. Here are a few simple scenarios that demonstrate the power of stock price growth for retirees.
- It all comes down to the earnings power of your companies. Dividends can help us find that profitability.
- Investing for total return, even in retirement can be the path to the most successful retirement, with the most income available.
I'm Not Selling Anything, I'm Buying Everything
- Recently, a Seeking Alpha author admitted to selling most everything due to fears of a market pullback and market over-valuation.
- In my opinion, this author is not yet an investor, but thanks to some recent experience and introduction to emotional risk, he may be on his way.
- This author teaches us that it is paramount to first have a plan when investing, a plan that prepares us and tells us what to do in any market condition.
The Stocks Catch The Bonds - 6.5 Years Later
- The year 2008 provided a very poor start date for monies invested in most stocks.
- From 2008, a typical bond heavy portfolio has outperformed a balanced and balanced growth portfolio that would offer double or more the stock exposure.
- Sometimes, the market announces that we proceed with caution - is this one of those periods where perhaps returns will be nil or minimal in the short-to-mid term?
- According to the Shiller Index, this is the third-most expensive market in market history.
Dividends Don't Matter In Retirement Either
- Stocks are the best performing asset class that provide the best opportunity for growth and returns that can beat inflation.
- What drives that growth is the earnings power of a company; the actual dividends do not drive earnings power, they are a reflection of that earnings success.
- Most would agree that the dividends don't matter in the accumulation phase, but the same holds true when harvesting in the retirement phase. What matters is earnings growth.
Getting The Returns Without The Risk
- A bond ladder can typically deliver the total return of the longest dated bond within the ladder.
- Bond laddering can greatly reduce the chance of having a negative year, even within a bond bear market.
- What's the sweet spot for the duration of a bond ladder if one fears a rising rate environment?
Cutting My Dividends By 35% - Improving My Dividend Growth Portfolio
- Most dividend growth investors on Seeking Alpha appear to invest for yield, that is likely leaving money on the table.
- Dividend growth offers the opportunity to outperform the market with respect to total return, but the magic is growing dividends, value and a low payout ratio.
- I have left behind the higher-yielding Vanguard VYM, and moved into the more pure dividend growth play of the much lower-yielding VIG.
- We should always remember that in the accumulation phase, all that matters is total return matched to the investor's risk tolerance level.
How To Outlive Your Money: A Lesson From Canada
- Canadian policy mandates that retirees remove 7.48% in their 72nd year. That level of drawdown is a recipe for retirement disaster.
- The 4% drawdown rule may not apply in current conditions. 3 may be the new 4 when it comes to spending rates in retirement.
- We'll examine the likely outcome of withdrawing at that high rate over the next couple of decades.
- We humans are living much longer, and adjustments have to be made. How do we make our money last as long as we do?
The Time Warren Buffett Got It Wrong
- Warren Buffett has suggested that a retiree might hold a mix of 90% equities and 10% bonds.
- The all-stock portfolio actually works quite well funding 4% or more of portfolio value, inflation adjusted, over most 30 year periods.
- But the equity portfolio increases risk during years of successive market declines.
- We'll have a look at the 90/10 portfolio for retirees, a 60/40 mix, along with bucketing with cash and bonds to fund retirement in stages.
Warren Buffett Was Right About Retirement
- Many well read studies suggest that one can fund a lasting retirement by withdrawing 4% to 4.5% of portfolio assets.
- Warren Buffett suggests that investors simply hold 90% S&P 500 and 10% in a bond fund. Is he serious?
- We'll examine how an all-equity portfolio would have performed in the draw down period over the last 10 years and through the last two market corrections.
- An all stock portfolio has an incredible track record of making money last for 30, 40, 50 years or more in the spending stage.
What If We See The 1940's All Over Again?
- Just because yields are low doesn't mean that they have nowhere to go but up.
- The last time we had crippling government debt and historical low yields, they stayed low for a decade and then some.
- We'll apply the yield hikes of the 1940's and 50's with today's yields on Treasuries to see what kind of performance we would receive.
- While bonds offered muted returns in the 40's and 50's the stocks came to their defense.
How Bad Could It Get For Bonds?
- Most investors have only known the good times for bonds. Yields have largely been falling since 1981. That could change in a hurry.
- Yields on Treasuries are near all-time lows; what happens if those rates spike?
- We'll look at what history offers as the worst-case scenario.
- Yields are low, there may not be much in the way of total return protection by way of yield.
How Long Can You Afford To Be Under Water?
- When the stocks markets correct, it can take many years for your portfolio to return to its previous total value.
- In addition to managing the initial price corrections, we should also manage the time period that it takes to move back into positive territory.
- We'll look at the recovery times in recent market corrections evaluating all-equity and balanced portfolios.
- It's important to pay attention to recovery periods in the accumulation and retirement or spending phases.
There's No Money To Be Made From Here, Maybe
- The stock markets are entering rarefied territory when it comes to valuations.
- There is usually not much money to be made from new monies invested at these tops.
- We'll look at the returns from previous market tops.
- What is the best strategy, and how do we create dry power out of thin air?
If I Was A Stock Picker, Here's What I'd Do
- I only hold three stocks to date, most of my holdings are by the way of ETFs.
- Many studies show that one can achieve diversification with 15-20 companies, perhaps I can lower the fees I pay by purchasing enough members of an index that I want to.
- In the end the most cost effective solution may lie with purchasing an ETF combined with a few individual stock selections.
- I am looking to capture the market-topping performance of the Dividend Aristocrats and Vanguard's VIG and VDIGX.
A Simple Way To Outperform The Market With Beta Power
- The total market that includes the small and mid cap companies has the ability to outperform the broader market S&P 500.
- Long Term Treasuries are one of the best risk-reducing agents available.
- What happens when we create a simple portfolio of 75% Total Market VTI and 25% long term treasuries by adding TLT? We still have an market outperform.
- What if we reduce volatility even further by creating a portfolio of market beating dividend growth companies with those long term treasuries?
What Is Total Return?
- In the accumulation phase, the most important metric is total return once the risk tolerance level is taken into consideration.
- Total return is widely misunderstood as an investment style. Of course, total return is a measurement of portfolio total value.
- Focusing on total return vs. total income may provide greater income in the spending phase, when that income is actually required.
Actually It Is All About Total Return...Totally!
- It's a simple mathematical fact, $2 million buys more income than $1 million, the goal should then be accumulating the highest portfolio value within your risk tolerance level.
- Why are many dividend growth investors essentially adopting a spending strategy in the accumulation phase?
- It's time to separate the accumulation phase and the spending phase.
- Making the transition from accumulation to spending is a very simple process for a knowledgeable investor.
The Most Important Article I Could Ever Write On Dividend Growth
- The dividend aristocrats have delivered on dividend growth's greatest gift - market beating total return.
- The formula for total return might be growing dividends supported by earnings growth and a low payout ratio.
- The dividend aristocrats are populated with many companies that surprisingly still have low to moderate and very manageable payout ratios.
- When we add the value filters of Vanguard's dividend growth funds we might be able to find the best of the best among the current 54 dividend aristocrats.
Vanguard VIG Top 10 Hits Bottom On Total Return
- Vanguard's Dividend Appreciation ETF is a wonderful total return machine that has beat the market from inception, delivering on dividend growth's potential.
- The top 10 holdings from VIG create a wonderful portfolio that has beat the market and total VIG holdings from inception.
- In the last two years, the top 10 has delivered sub par results. How many companies does it take to replicate an index? 15? 20? More?
Simply Buy The Dividend Aristocrats And Perhaps Beat The Market
- The Dividend Aristocrats have outperformed the market. Dividend Aristocrats are members of the S&P 500 that have increased their dividends for 25 years or more.
- One can purchase the Dividend Aristocrat members with one easy ETF - NOBL.
- Are you beating the Aristocrats? If not, why not just purchase this simple ETF?
- This article also looks at why investors try to beat the market.
Finding Alpha With Dividend Growth: The Stocks
- In the accumulation phase, total return is the most important metric, with strategy matched to your risk tolerance level of course.
- Studies suggest that low payout ratios are the signal that market beating total return is on the way.
- I've consulted with some market beaters to see what low payout ratio companies are in their portfolios.
How To Get The Most Out Of Dividend Growth
- Dividend Growth offers the potential to beat the market according to many studies.
- Investors might be better served paying more attention to total return and less to the yield and dividend growth.
- Is the Chowder rule a secret to success or does it focus too heavily on the yield and dividend history?
Dividend Growth: Managing Income, Reducing Total Return
- The accumulation phase is all about total return; find out why dividend growth has delivered in the past and ensure that you have a strategy that looks to the future.
- The sweet spot for dividend growth might be high yield and low payout ratio.
- Don't leave money on the table by avoiding dividend initiators or those companies with a shorter history of dividends.
- My Three Stocks
- VYM Increases Its Dividend 20%: ETF Portfolio Increases Its Lead Over The Stock Pickers
- Dividend Growth's Magic Is Beta, Not Dividends
- Where Are The Markets Going Next?
- A Great Year For Balanced Portfolios
- In The Recent Pullback, Long-Term Treasuries Do Their Thing
- Small Caps Will Outperform If You Give 'Em Time