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  • Total Return Is Not All That Matters In The Accumulation Phase  [View article]
    You are correct bonds pay interest and stocks pay dividends of course.. I meant to say distributions. Since I sweep all interest and dividends into a money market account along with year end capital gains distributions for me it becomes a pot of money from which I pay my self and use the rest to rebalance my portfolio. With regard to an emergency fund for me I try to have the equivalent of 6 months income available in money market and checking accounts most of it at a local brick and mortar bank.
    Mar 22, 2014. 01:13 PM | Likes Like |Link to Comment
  • Total Return Is Not All That Matters In The Accumulation Phase  [View article]
    Total return investing will almost certainly result in selling stock assets to meet living expenses unless: a) your living expenses are really low like 2% of your annual net worth or b)your nest egg is very large like 5 million plus. or c) you have super high dividend investments such as MLPs REITs etc. For most people a combination of long bonds and high yield bonds making up 70-80% of a portfolio to generate a steady retirement cash flow is a better solution. Other- wise people will be left doing software games like Monte Carlo to guess if they will outlive their money. A total return retiree with less than $2 million would have probably had to sell a lot of stock investment in 2002, 2003, 2008 and 2011. A cash flow investor would have been able too ride those years out with bond dividends and high yield stock dividends and would not have been forced to sell anything in those negative total return years to meet expenses. Investing for capital appreciation ie. total return is entirely different than income (cash flow) investing. Some people have fat pensions or other sources of income like rentals and total return investing would still work for them if they have little or no need to draw yearly cash. But most retirees will run out of money using the total return model due to the inevitable bear markets ahead and forced asset sales at market lows.
    Mar 22, 2014. 03:01 AM | 1 Like Like |Link to Comment
  • Total Return Is Not All That Matters In The Accumulation Phase  [View article]
    Thanks Eddie
    Mar 22, 2014. 12:07 AM | Likes Like |Link to Comment
  • Total Return Is Not All That Matters In The Accumulation Phase  [View article]
    The Bond era is not over in my opinion. Here is why I believe this. #1 Take a look at German and Japanese government bonds they are well below US rates. #2 My main focus is on high yield corporate and HY muni bonds which react more to a financial crises than treasury rates. #3 the government can not afford to pay higher interest so it will do is much as possible to keep rates low at the fed including even more treasury purchases.#4 the demographics work against inflation the peak spending age is 48 and our population thanks to boomers is getting older. #5 the new service sector jobs such as do not pay what those smokestack factory jobs paid before we shipped them off to China. If for example if we do hit another financial crises and my high yield bond fund hits double digit returns after a 20% drop like it did in 2008 I will happily buy more hand over fist. Finally if you look at the Shiller PE and the Buffet GDP vs Total stock market returns over the next 7-8 years the stock market is likely to return low annualized single digits, from here that are worse than the bond yields that I hold. Thanks for the praise I do walk the walk and eat my own cooking. What I dislike most about a total return approach to stocks is in a breakeven year like 2011 you would be forced to sell stock to pay bills. Had you been able to hold those stocks you would have made nice gains in 2012 and 2013. Even in my IRA Which I have no plan to touch for another 8 years for RMDs I own mostly bonds but use 1/2 the bond interest to buy the total stock market index. Thanks again for your reply
    Mar 21, 2014. 07:44 PM | Likes Like |Link to Comment
  • Total Return Is Not All That Matters In The Accumulation Phase  [View article]
    To my mind in retirement cash flow is king. A total return approach can lead to big drawdowns in capital and investments in bear markets which seem to come along every 5 years or so. I think the best way to construct a portfolio is based on income need. In my case I need to withdraw 3% per year of my investment portfolio. I am a young retiree at age 62. I also have a young wife with a child on the way. So I need to preserve my wealth and not draw it down so I need to capture at least an additional 2%+ per year to keep up with inflation. About 20% of my investment is in stock funds from Vanguard the stock side of my portfolio alone does not provide the 5% I need without being forced to sell stock funds to put food on the table which I don't want to do. My bond portfolio generates my income. I don't like short and medium duration bonds they don't pay enough to keep up with inflation let alone generate a useable income. My remaining portfolio 80% is in the following vanguard bond funds. High Yield muni tax free (30%) payout 4.2% High yield B grade corporate (30%)payout 5.8% Corporate investment grade (20%) payout about 4.8%. This is where the nice cash flow comes in. Since March 2009 my net worth is 1/3 Higher and my cash flow has been nice and steady with no need to sell any stock funds to support my family.
    Mar 21, 2014. 01:58 PM | 1 Like Like |Link to Comment
  • A 9.8% Yield For Enterprising Investors  [View article]
    gary747 unless you are invested mostly in bonds why would you be fully invested in stocks near all time records when the total value of the stock market is running 118% of GDP (in the danger zone) and total returns over the next 8 years from here are projected at 2% / year or 16% total return 8 years from now.
    Mar 11, 2014. 02:18 PM | 1 Like Like |Link to Comment
  • Two-Season Approach To Building Efficient Portfolios Using S&P 500  [View article]
    Buy the Stock Traders almanac, or Sy Hardings book.
    Mar 11, 2014. 01:58 PM | Likes Like |Link to Comment
  • Still Bearish On Junk Bonds  [View article]
    I think you are wrong airlarr a yield of 5% is 2-2.5% above inflation. TIPs have been doing very poorly and will continue to do poorly unless inflation takes off in a big way. The FED will continue to keep rates low because the US government can not afford higher interest rates on treasuries. All the printed money is going to banks and stock mal-investment. Since I made my mid November post how does you TIP's return compare to Vanguard High yield? Or Vanguard the high Yield Muni fund??
    Mar 11, 2014. 01:33 PM | Likes Like |Link to Comment
  • Municipal market still stuck in the 70s  [View news story]
    I hold a Vanguard High Yield Muni Fund my costs are very low. I think in high yield and long duration a good low cost no load mutual fund is the best way to manage costs and default risks.
    Mar 11, 2014. 01:09 PM | Likes Like |Link to Comment
  • Still Bearish On Junk Bonds  [View article]
    Junk bonds are the best performing of the bond category in my Vanguard bond fund universe. Since you are being paid to take a credit default risk it is far less rate sensitive and way better performing now than long term treasuries. Furthermore a junk bond fund due to wide holdings mitigates default risk big time. Further risk can be managed by picking a fund more centered in the BBB to B range with minimal C grade range exposure. When somebody lumps all bonds together like medium duration High Yield corporate, and long term treasuries, it tells me they do not understand high yield bonds which correlate more closely to stocks most of the time. Shorting a junk bond fund was more like shorting the stock market. In a bull market he should have shorted TLT long treasuries which have almost a perfect negative correlation to the S&P 500.
    Nov 5, 2013. 02:18 PM | 2 Likes Like |Link to Comment
  • The Changes I Made To My Portfolio  [View article]
    I am a long time Vanguard user and hold several admiral funds in both an IRA and a non-IRA taxable accounts. Here is my view of your holdings. #1 your small cap value fund is very heavily weighted in Reits and since you are already holding the Reit fund you are doubling down on real estate. #2 You are 40% in small caps if you look both international and domestic #3 I think like Boggle does that you should own your age in bonds so in your case why not a 40% bond position in VCLT it pays 5%, intermediate bonds barely keep up with inflation and are a poor counterweight to stocks. Corporations have a better risk reward than treasuries do these days. #5 I love your seasonal rebalance but why not rebalance to within 1% of the 20% target take full advantage of the power of seasonality.
    Nov 5, 2013. 01:16 PM | Likes Like |Link to Comment
  • S&P 500: Dividend Cuts Hit Recessionary Levels In February 2013  [View article]
    I also would like to see a chart that goes back at least 15 years specifically what was the rate of dividend cuts leading up to and including the tech bubble market top of S&P 1527?
    Feb 27, 2013. 02:03 PM | 1 Like Like |Link to Comment
  • S&P 500 Market Valuation And Historic Returns  [View article]
    another headwind is that when boomers who over own stock or equity funds will be forced to be net sellers in retirement with not enough younger buyers to pick it up. The whole IRA 401K scheeme is a huge untested retirement scheem that depends of robust population and economic growth which we no longer have.
    Jan 11, 2013. 02:22 AM | Likes Like |Link to Comment
  • S&P 500 Market Valuation And Historic Returns  [View article]
    Well said the economic headwind from the aging population is huge.(full disclosure I am a boomer) Your points are well taken and supported by demographer Harry Dent. I would add one more issue. Lets call it the crowded exit for equity since more people will be retiring over the next 15 years or so, many more than entering the workforce. And since financial people have pushed boomers into 60+% stock vs Bond positions. Boomers will be forced to sell equity at ever lower prices to raise cash during retirement since puny 2% dividends will not be enough to fund retirement expenses. With relentless future net selling and not so many Gen X and Y buyers we are headed for a big market drop. Dent himself is predicting Dow 3000. I am sure the market can rally off and on for a few more years but the day of reckoning is coming probably around 2017 or so. Our 1-2% GDP "growth" will bring it sooner rather than later. If inflation was not understated by the government true GDP is closer to 0-1% when adjusted for the 3-4% real world annual cost of living we actually experience including the higher cost of taxes to pay for more government.
    Jan 11, 2013. 02:15 AM | Likes Like |Link to Comment
  • S&P 500 Market Valuation And Historic Returns  [View article]
    Thomas ...The second shoulder we are in now is the sovereign debt bubble which followed the tech shoulder and housing head. Need more evidence.... how about serious talk of issuing trillion dollar coins and a 20+ Trillion dollar debt ceiling. PS how much money was made in the stock market from 1929 to 1954? answer 0, market returns can be poor for a long time well over a decade in secular bear markets such as what we have now My 15% stock 80% bond 5% cash portfolio annualized total return results are as 5y=6%, 3yr=8% last year=10% that would work well for any age person saving for retirement or in retirement.
    Jan 8, 2013. 02:34 PM | 1 Like Like |Link to Comment