Starved & Searching for Yield???

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William Million
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Re: Starved & Searching for Yield???

Post by William Million »

7eight9 wrote: Fri Nov 06, 2020 12:39 am
abuss368 wrote: Thu Nov 05, 2020 10:39 pm
rockstar wrote: Thu Nov 05, 2020 10:22 pm I recently bought some F/PRC at par for yield. I'm getting 6% for a couple of years. i doubt it will go to maturity. I expect it to called at its first call date. I have some WFC preferred too that I am planning to sell next April. It has yield for me about 5% for the last couple of years. I expect to make another point or two of yield from capital gains.
I am not familiar with those tickers. Would you mind sharing the fund names?
F/PRC --- Ford Motor Co. 6% Notes due December 1, 2059 --- https://www.wsj.com/market-data/quotes/us/F.PRC
WFC --- Wells Fargo & Co (there are multiple preferred issues --- https://www.wellsfargo.com/about/invest ... red-stock/)

If inclined to take a single company risk on Ford, I'd just buy the common stock. However, you're not buying income but taking a high-risk gamble on a company with iconic brands that is investing heavily in electric cars, self-drive cars and ride sharing. I believe it's a lose your shirt or 5-fold your money investment.
RAchip
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Re: Starved & Searching for Yield???

Post by RAchip »

MO - 9.2% yield
T - 7.5% yield
WBA - 5% yield
PRU - 6.9% yield

And if you do a little work you can find 15-20 other large well known companies (excluding oil) yielding 4-6%. If you are willing to take the risk with oil companies, you could be a big winner if oil prices rise.
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Re: Starved & Searching for Yield???

Post by columbia »

Odd thread.

If you're looking for high yield, then buy individual junk bonds and hold them until redemption - or worse. There's no free lunch, so the idea that a higher yield stock fund will lead a higher risk adjusted, total return (in comparison to VTI) is curious.
000
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Re: Starved & Searching for Yield???

Post by 000 »

columbia wrote: Sat Nov 07, 2020 9:27 pm If you're looking for high yield, then buy individual junk bonds and hold them until redemption - or worse.
I think not.
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Re: Starved & Searching for Yield???

Post by BolderBoy »

Ramjet wrote: Fri Nov 06, 2020 9:04 amSPIA.
I think that Jonathan Clements in his HumbleDollar newsletter within the last couple of months, outlined a SPIA ladder that he's created for himself just for this reason.
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Re: Starved & Searching for Yield???

Post by hudson »

rockstar wrote: Sat Nov 07, 2020 1:12 pm
hudson wrote: Sat Nov 07, 2020 9:02 am
rockstar wrote: Fri Nov 06, 2020 10:04 pm
7eight9 wrote: Fri Nov 06, 2020 12:39 am
abuss368 wrote: Thu Nov 05, 2020 10:39 pm

I am not familiar with those tickers. Would you mind sharing the fund names?
F/PRC --- Ford Motor Co. 6% Notes due December 1, 2059 --- https://www.wsj.com/market-data/quotes/us/F.PRC
WFC --- Wells Fargo & Co (there are multiple preferred issues --- https://www.wellsfargo.com/about/invest ... red-stock/)
If I want preferred exposure, I buy preferred, not a fund. I find the actual preferred stock to be less volatile, and I can better time how long I will end up holding by the first call date. I can also target buying under par when available.
Larry Swedroe discussed preferred stocks in his book The Good, the Flawed, the Bad, and the Ugly https://www.amazon.com/Only-Guide-Alter ... B003NE61GC
Here's a quick summary...
viewtopic.php?p=23364#p23364
I don't see anything wrong with preferred stock. I bought all of my positions under par. I'll earn the yield plus if I sell, I'll capture a capital gain on top. My WFC/PRX preferred I bought as low $21 and as high as $25. When I sell these positions off next April, I'll come out better than the S&P 500.
Rockstar, I tried to find my copy of Larry's book so that I could summarize what he said about preferred stocks. I don't remember what he said; After reading his book, I just made a mental note to pass on preferred stocks. Maybe someone with a copy can look it up?
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Re: Starved & Searching for Yield???

Post by Angst »

hudson wrote: Sun Nov 08, 2020 9:37 am Rockstar, I tried to find my copy of Larry's book so that I could summarize what he said about preferred stocks. I don't remember what he said; After reading his book, I just made a mental note to pass on preferred stocks. Maybe someone with a copy can look it up?
I don't have a link to a Larry quote at my fingertips, but it might be worth checking out the Wiki on preferred stock:
https://www.bogleheads.org/wiki/Preferred_stock

I also think the following old post probably sums up the problems well:
Valuethinker wrote: Mon Jan 20, 2014 3:58 am
In a sense then preference stock often combines the worst features of corporate bonds (frequently callable; lack of upside) with those of common stock (little protection in bankruptcy; possibility dividend will be omitted). In addition portfolios of preference shares are highly concentrated around financial companies, thus reducing diversification.
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Re: Starved & Searching for Yield???

Post by bck63 »

I am steadily tilting toward high dividend stocks that have low beta, combined with some high-dividend etfs and utility and reit etfs. In this portion of my portfolio, beta is about 0.6 and dividend yield is about 3.5%. I am sacrificing some upside to have decreased volatility and increased income.
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Re: Starved & Searching for Yield???

Post by Stinky »

hudson wrote: Fri Nov 06, 2020 9:09 am If I was starving for yield, I would look at the fixed annuity products like MYGAs or SPIAs up to my state guaranty association's limit.
+1
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Re: Starved & Searching for Yield???

Post by EfficientInvestor »

Sell call options against some of your current holdings.
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Re: Starved & Searching for Yield???

Post by birdog »

columbia wrote: Sat Nov 07, 2020 9:27 pm If you're looking for high yield, then buy individual junk bonds and hold them until redemption - or worse.
If one was considering junk bonds, wouldn't a fund be a better option than individual holdings in order to diversify away some of the credit risk?
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Re: Starved & Searching for Yield???

Post by abuss368 »

columbia wrote: Sat Nov 07, 2020 9:27 pm Odd thread.

If you're looking for high yield, then buy individual junk bonds and hold them until redemption - or worse. There's no free lunch, so the idea that a higher yield stock fund will lead a higher risk adjusted, total return (in comparison to VTI) is curious.
No where in this thread was the discussion pointed towards out performing the markets as defined by the Total Stock funds. This was pointed towards yields and dividends.
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Re: Starved & Searching for Yield???

Post by abuss368 »

000 wrote: Sat Nov 07, 2020 10:28 pm
columbia wrote: Sat Nov 07, 2020 9:27 pm If you're looking for high yield, then buy individual junk bonds and hold them until redemption - or worse.
I think not.
High Yield Bonds are interesting. A lot of dividends for sure but overall return is much less than Total Bond. I had a family member time Junk Bonds during the Great Recession and it really paid off.
John C. Bogle: “Simplicity is the master key to financial success."
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Re: Starved & Searching for Yield???

Post by abuss368 »

bck63 wrote: Sun Nov 08, 2020 10:25 pm I am steadily tilting toward high dividend stocks that have low beta, combined with some high-dividend etfs and utility and reit etfs. In this portion of my portfolio, beta is about 0.6 and dividend yield is about 3.5%. I am sacrificing some upside to have decreased volatility and increased income.
Are you investing in Vanguard US High Dividend and Vanguard International High Dividend? Are you also investing in Vanguard’s US and International REIT funds?
John C. Bogle: “Simplicity is the master key to financial success."
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Re: Starved & Searching for Yield???

Post by bck63 »

abuss368 wrote: Mon Nov 09, 2020 2:04 pm
bck63 wrote: Sun Nov 08, 2020 10:25 pm I am steadily tilting toward high dividend stocks that have low beta, combined with some high-dividend etfs and utility and reit etfs. In this portion of my portfolio, beta is about 0.6 and dividend yield is about 3.5%. I am sacrificing some upside to have decreased volatility and increased income.
Are you investing in Vanguard US High Dividend and Vanguard International High Dividend? Are you also investing in Vanguard’s US and International REIT funds?
I use both VYM and VYMI as part of this portion of my portfolio. For REITs, I invest in some individual residential REITs, and also XLRE (The Real Estate Select Sector SPDR Fund). People will always need a roof over their head, so I like tilting to apartment REITs.

I also invest in a high-yield bond fund, and own about 10 individual high-dividend, low beta stocks. Finally, I invest in XLU, the Utility Select Sector SPDR Fund).

This is only about 2% of my portfolio, but I will grow that over time.
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Re: Starved & Searching for Yield???

Post by bck63 »

abuss368 wrote: Mon Nov 09, 2020 2:04 pm
bck63 wrote: Sun Nov 08, 2020 10:25 pm I am steadily tilting toward high dividend stocks that have low beta, combined with some high-dividend etfs and utility and reit etfs. In this portion of my portfolio, beta is about 0.6 and dividend yield is about 3.5%. I am sacrificing some upside to have decreased volatility and increased income.
Are you investing in Vanguard US High Dividend and Vanguard International High Dividend? Are you also investing in Vanguard’s US and International REIT funds?
abuss368 -

Thought I'd share this with you. A little outline of my high-dividend, low-beta portfolio:

Holdings Dividend/SEC Yield Beta

Archer Daniels Midland (ADM) 3.31% 0.90
Colgate Palmolive (CL) 2.25% 0.57
Equity Residential (EQR) 5.21% 0.68
Fidelity High Income Fund (SPHIX) 4.03% 0.47
General Mills (GIS) 3.40% 0.59
Kimberly-Clark (KMB) 2.72% 0.51
Mid America Apartment Comms. (MAA) 3.56% 0.64
Procter & Gamble (PG) 2.33% 0.41
SPDR Select Real Estate ETF (XLRE) 3.24% 0.69
SPDR Select Utilities ETF (XLU) 3.31% 0.42
Vanguard High Div ETF (VYM) 3.61% 0.93
Vanguard High Div Intl ETF (VYMI) 3.93% 1.00
Walmart (WMT) 1.63% 0.28
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Re: Starved & Searching for Yield???

Post by rockstar »

William Million wrote: Sat Nov 07, 2020 6:33 pm
7eight9 wrote: Fri Nov 06, 2020 12:39 am
abuss368 wrote: Thu Nov 05, 2020 10:39 pm
rockstar wrote: Thu Nov 05, 2020 10:22 pm I recently bought some F/PRC at par for yield. I'm getting 6% for a couple of years. i doubt it will go to maturity. I expect it to called at its first call date. I have some WFC preferred too that I am planning to sell next April. It has yield for me about 5% for the last couple of years. I expect to make another point or two of yield from capital gains.
I am not familiar with those tickers. Would you mind sharing the fund names?
F/PRC --- Ford Motor Co. 6% Notes due December 1, 2059 --- https://www.wsj.com/market-data/quotes/us/F.PRC
WFC --- Wells Fargo & Co (there are multiple preferred issues --- https://www.wellsfargo.com/about/invest ... red-stock/)

If inclined to take a single company risk on Ford, I'd just buy the common stock. However, you're not buying income but taking a high-risk gamble on a company with iconic brands that is investing heavily in electric cars, self-drive cars and ride sharing. I believe it's a lose your shirt or 5-fold your money investment.
It's a preferred stock paying a 6% yield with a call date less than 5 years from now that is most likely not going to go bankrupt. I don't see what the problem is buying it at par or below. I'll clip my coupon as a qualified dividend, and I'll receive back what I paid when it's called. I can always sell it. Bonds have limited upside with treasury yields near zero, and companies with good balance sheets don't provide much yield.
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Re: Starved & Searching for Yield???

Post by hudson »

rockstar wrote: Mon Nov 09, 2020 7:01 pm
William Million wrote: Sat Nov 07, 2020 6:33 pm
7eight9 wrote: Fri Nov 06, 2020 12:39 am
abuss368 wrote: Thu Nov 05, 2020 10:39 pm
rockstar wrote: Thu Nov 05, 2020 10:22 pm I recently bought some F/PRC at par for yield. I'm getting 6% for a couple of years. i doubt it will go to maturity. I expect it to called at its first call date. I have some WFC preferred too that I am planning to sell next April. It has yield for me about 5% for the last couple of years. I expect to make another point or two of yield from capital gains.
I am not familiar with those tickers. Would you mind sharing the fund names?
F/PRC --- Ford Motor Co. 6% Notes due December 1, 2059 --- https://www.wsj.com/market-data/quotes/us/F.PRC
WFC --- Wells Fargo & Co (there are multiple preferred issues --- https://www.wellsfargo.com/about/invest ... red-stock/)

If inclined to take a single company risk on Ford, I'd just buy the common stock. However, you're not buying income but taking a high-risk gamble on a company with iconic brands that is investing heavily in electric cars, self-drive cars and ride sharing. I believe it's a lose your shirt or 5-fold your money investment.
It's a preferred stock paying a 6% yield with a call date less than 5 years from now that is most likely not going to go bankrupt. I don't see what the problem is buying it at par or below. I'll clip my coupon as a qualified dividend, and I'll receive back what I paid when it's called. I can always sell it. Bonds have limited upside with treasury yields near zero, and companies with good balance sheets don't provide much yield.
Rockstar,
I think that investment is fine for someone who knows the advantages, disadvantages, the ins, the outs, and the risks.
Where would preferred stocks fit in this list from safest to less safe?

Treasuries and CDs
Municipal bonds...AAA/AA/A
Investment grade corporate bonds
High yield bonds
Common Stock
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Re: Starved & Searching for Yield???

Post by rockstar »

hudson wrote: Mon Nov 09, 2020 7:47 pm
rockstar wrote: Mon Nov 09, 2020 7:01 pm
William Million wrote: Sat Nov 07, 2020 6:33 pm
7eight9 wrote: Fri Nov 06, 2020 12:39 am
abuss368 wrote: Thu Nov 05, 2020 10:39 pm

I am not familiar with those tickers. Would you mind sharing the fund names?
F/PRC --- Ford Motor Co. 6% Notes due December 1, 2059 --- https://www.wsj.com/market-data/quotes/us/F.PRC
WFC --- Wells Fargo & Co (there are multiple preferred issues --- https://www.wellsfargo.com/about/invest ... red-stock/)

If inclined to take a single company risk on Ford, I'd just buy the common stock. However, you're not buying income but taking a high-risk gamble on a company with iconic brands that is investing heavily in electric cars, self-drive cars and ride sharing. I believe it's a lose your shirt or 5-fold your money investment.
It's a preferred stock paying a 6% yield with a call date less than 5 years from now that is most likely not going to go bankrupt. I don't see what the problem is buying it at par or below. I'll clip my coupon as a qualified dividend, and I'll receive back what I paid when it's called. I can always sell it. Bonds have limited upside with treasury yields near zero, and companies with good balance sheets don't provide much yield.
Rockstar,
I think that investment is fine for someone who knows the advantages, disadvantages, the ins, the outs, and the risks.
Where would preferred stocks fit in this list from safest to less safe?

Treasuries and CDs
Municipal bonds...AAA/AA/A
Investment grade corporate bonds
High yield bonds
Common Stock
There are a lot different types of risks. Most of those won't return me a real yield.
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Re: Starved & Searching for Yield???

Post by birdog »

abuss368 wrote: Mon Nov 09, 2020 2:02 pm High Yield Bonds are interesting. A lot of dividends for sure but overall return is much less than Total Bond. I had a family member time Junk Bonds during the Great Recession and it really paid off.
Hmmm. When I compare Vanguard Total Bond (BND) to Vanguard High Yield (VWEAX) going back to May 2007 (start of VWEAX) I show high yield beats total bond (4.43% vs 3.15%). Also, when I compare total bond (BND) to the Fallen Angel ETF (ANGL) going back to 2012 (start of ANGL) I show ANGL more than doubled total bond (7.9% vs 3.5%). Do you have data from other time periods showing high yield has an overall return that is less than total bond?
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Re: Starved & Searching for Yield???

Post by hudson »

rockstar wrote: Mon Nov 09, 2020 9:56 pm There are a lot different types of risks. Most of those won't return me a real yield.
Anything that works is good technique.
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Re: Starved & Searching for Yield???

Post by FelixTheCat »

I have a brokerage account that pays monthly dividends. I plan on using the dividends in retirement.

I wish Bogleheads had an income portfolio to live off dividends. The only thing I have found is the Income Series suggestion by Vanguard. https://advisors.vanguard.com/iwe/pdf/FASINVMP.pdf

P.S. Please don't attack me about Total Return. I simply want to design a second portfolio for income generation.
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Re: Starved & Searching for Yield???

Post by Schlabba »

FelixTheCat wrote: Tue Nov 10, 2020 1:53 pm I have a brokerage account that pays monthly dividends. I plan on using the dividends in retirement.

I wish Bogleheads had an income portfolio to live off dividends. The only thing I have found is the Income Series suggestion by Vanguard. https://advisors.vanguard.com/iwe/pdf/FASINVMP.pdf

P.S. Please don't attack me about Total Return. I simply want to design a second portfolio for income generation.
That is a great link. It basically shows vanguard's choice in the question the OP asked. I wonder why they choose 1/3rd total market and 2/3rd high dividend yield though. My initial thought was to be 50% high yield and 50% total market, but I see I am allowed to go even more towards high yield :happy . I am also planning on living off dividends.
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Re: Starved & Searching for Yield???

Post by FelixTheCat »

Schlabba wrote: Tue Nov 10, 2020 2:20 pm That is a great link. It basically shows vanguard's choice in the question the OP asked. I wonder why they choose 1/3rd total market and 2/3rd high dividend yield though. My initial thought was to be 50% high yield and 50% total market, but I see I am allowed to go even more towards high yield :happy . I am also planning on living off dividends.
Vanguard Portfolio Allocation Models have Income defined as 0/100, 20/80, 30/70. I went 0/100.

I'll watch it for a while to see how it works out.
Last edited by FelixTheCat on Thu Nov 12, 2020 1:45 pm, edited 1 time in total.
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Re: Starved & Searching for Yield???

Post by Longtermgrowth »

abuss368, I wouldn't be able to pick between those two options, so I have some of everything.

Besides total market funds, I hold a number of dividend funds including Vanguard's High Dividend Yield ETF, a few monthly paying stock ETFs, a global REIT ETF, even a preferred stock ETF.
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Re: Starved & Searching for Yield???

Post by abuss368 »

birdog wrote: Tue Nov 10, 2020 9:49 am
abuss368 wrote: Mon Nov 09, 2020 2:02 pm High Yield Bonds are interesting. A lot of dividends for sure but overall return is much less than Total Bond. I had a family member time Junk Bonds during the Great Recession and it really paid off.
Hmmm. When I compare Vanguard Total Bond (BND) to Vanguard High Yield (VWEAX) going back to May 2007 (start of VWEAX) I show high yield beats total bond (4.43% vs 3.15%). Also, when I compare total bond (BND) to the Fallen Angel ETF (ANGL) going back to 2012 (start of ANGL) I show ANGL more than doubled total bond (7.9% vs 3.5%). Do you have data from other time periods showing high yield has an overall return that is less than total bond?
Interesting. Do you invest in those funds?
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Re: Starved & Searching for Yield???

Post by bck63 »

birdog wrote: Tue Nov 10, 2020 9:49 am
abuss368 wrote: Mon Nov 09, 2020 2:02 pm High Yield Bonds are interesting. A lot of dividends for sure but overall return is much less than Total Bond. I had a family member time Junk Bonds during the Great Recession and it really paid off.
Hmmm. When I compare Vanguard Total Bond (BND) to Vanguard High Yield (VWEAX) going back to May 2007 (start of VWEAX) I show high yield beats total bond (4.43% vs 3.15%). Also, when I compare total bond (BND) to the Fallen Angel ETF (ANGL) going back to 2012 (start of ANGL) I show ANGL more than doubled total bond (7.9% vs 3.5%). Do you have data from other time periods showing high yield has an overall return that is less than total bond?
Fidelity's SPHIX (High Income Fund) has also out performed Vanguard Total Market (VBTLX) since 2002 - CAGR of 7.10% vs 4.50% (with much greater volatility, of course).

I own SPHIX.
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Re: Starved & Searching for Yield???

Post by birdog »

abuss368 wrote: Tue Nov 10, 2020 6:12 pm
birdog wrote: Tue Nov 10, 2020 9:49 am
abuss368 wrote: Mon Nov 09, 2020 2:02 pm High Yield Bonds are interesting. A lot of dividends for sure but overall return is much less than Total Bond. I had a family member time Junk Bonds during the Great Recession and it really paid off.
Hmmm. When I compare Vanguard Total Bond (BND) to Vanguard High Yield (VWEAX) going back to May 2007 (start of VWEAX) I show high yield beats total bond (4.43% vs 3.15%). Also, when I compare total bond (BND) to the Fallen Angel ETF (ANGL) going back to 2012 (start of ANGL) I show ANGL more than doubled total bond (7.9% vs 3.5%). Do you have data from other time periods showing high yield has an overall return that is less than total bond?
Interesting. Do you invest in those funds?
No, but I’m looking into them. If the distribution yield of my bond fund (BIV - Vanguard Intermediate Bond Index) drops below inflation (currently at 1.4%) then I’ll look at high yield funds a lot harder. The last monthly interest payment from BIV was just over 2%. I’m not interested in negative real returns in my investments. A limited amount of ANGL is a possibility. I’ve stuck to my two fund portfolio for a long time but if real returns go negative in my bond fund then I probably won’t continue to add to it. Your thoughts?
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Re: Starved & Searching for Yield???

Post by hudson »

birdog wrote: Wed Nov 11, 2020 11:06 am
abuss368 wrote: Tue Nov 10, 2020 6:12 pm
birdog wrote: Tue Nov 10, 2020 9:49 am
abuss368 wrote: Mon Nov 09, 2020 2:02 pm High Yield Bonds are interesting. A lot of dividends for sure but overall return is much less than Total Bond. I had a family member time Junk Bonds during the Great Recession and it really paid off.
Hmmm. When I compare Vanguard Total Bond (BND) to Vanguard High Yield (VWEAX) going back to May 2007 (start of VWEAX) I show high yield beats total bond (4.43% vs 3.15%). Also, when I compare total bond (BND) to the Fallen Angel ETF (ANGL) going back to 2012 (start of ANGL) I show ANGL more than doubled total bond (7.9% vs 3.5%). Do you have data from other time periods showing high yield has an overall return that is less than total bond?
Interesting. Do you invest in those funds?
No, but I’m looking into them. If the distribution yield of my bond fund (BIV - Vanguard Intermediate Bond Index) drops below inflation (currently at 1.4%) then I’ll look at high yield funds a lot harder. The last monthly interest payment from BIV was just over 2%. I’m not interested in negative real returns in my investments. A limited amount of ANGL is a possibility. I’ve stuck to my two fund portfolio for a long time but if real returns go negative in my bond fund then I probably won’t continue to add to it. Your thoughts?
BIV looks really OK compared to many alternative investments. The Trailing Twelve Months Distribution Yield is 2.34%. It's about 70% AAA/AA/A rated bonds. I'm guessing that it'll take a while to get down to 1.4%. As you know, all you've got to do is watch the monthly payout; watch for a better deal. I personally wouldn't want to go any riskier.
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Re: Starved & Searching for Yield???

Post by abuss368 »

birdog wrote: Wed Nov 11, 2020 11:06 am
abuss368 wrote: Tue Nov 10, 2020 6:12 pm
birdog wrote: Tue Nov 10, 2020 9:49 am
abuss368 wrote: Mon Nov 09, 2020 2:02 pm High Yield Bonds are interesting. A lot of dividends for sure but overall return is much less than Total Bond. I had a family member time Junk Bonds during the Great Recession and it really paid off.
Hmmm. When I compare Vanguard Total Bond (BND) to Vanguard High Yield (VWEAX) going back to May 2007 (start of VWEAX) I show high yield beats total bond (4.43% vs 3.15%). Also, when I compare total bond (BND) to the Fallen Angel ETF (ANGL) going back to 2012 (start of ANGL) I show ANGL more than doubled total bond (7.9% vs 3.5%). Do you have data from other time periods showing high yield has an overall return that is less than total bond?
Interesting. Do you invest in those funds?
No, but I’m looking into them. If the distribution yield of my bond fund (BIV - Vanguard Intermediate Bond Index) drops below inflation (currently at 1.4%) then I’ll look at high yield funds a lot harder. The last monthly interest payment from BIV was just over 2%. I’m not interested in negative real returns in my investments. A limited amount of ANGL is a possibility. I’ve stuck to my two fund portfolio for a long time but if real returns go negative in my bond fund then I probably won’t continue to add to it. Your thoughts?
I believe is less is more. Less funds with bigger balances appears to work. My concern with High Yield bonds (and bonds in general) is higher yield almost always means higher risks.

You invest in Total Stock and Total Bond correct? In other words, I recall (if I am correct) that you do not invest in International stocks and bonds.
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Re: Starved & Searching for Yield???

Post by birdog »

abuss368 wrote: Wed Nov 11, 2020 6:16 pm
birdog wrote: Wed Nov 11, 2020 11:06 am
abuss368 wrote: Tue Nov 10, 2020 6:12 pm
birdog wrote: Tue Nov 10, 2020 9:49 am
abuss368 wrote: Mon Nov 09, 2020 2:02 pm High Yield Bonds are interesting. A lot of dividends for sure but overall return is much less than Total Bond. I had a family member time Junk Bonds during the Great Recession and it really paid off.
Hmmm. When I compare Vanguard Total Bond (BND) to Vanguard High Yield (VWEAX) going back to May 2007 (start of VWEAX) I show high yield beats total bond (4.43% vs 3.15%). Also, when I compare total bond (BND) to the Fallen Angel ETF (ANGL) going back to 2012 (start of ANGL) I show ANGL more than doubled total bond (7.9% vs 3.5%). Do you have data from other time periods showing high yield has an overall return that is less than total bond?
Interesting. Do you invest in those funds?
No, but I’m looking into them. If the distribution yield of my bond fund (BIV - Vanguard Intermediate Bond Index) drops below inflation (currently at 1.4%) then I’ll look at high yield funds a lot harder. The last monthly interest payment from BIV was just over 2%. I’m not interested in negative real returns in my investments. A limited amount of ANGL is a possibility. I’ve stuck to my two fund portfolio for a long time but if real returns go negative in my bond fund then I probably won’t continue to add to it. Your thoughts?
I believe is less is more. Less funds with bigger balances appears to work. My concern with High Yield bonds (and bonds in general) is higher yield almost always means higher risks.

You invest in Total Stock and Total Bond correct? In other words, I recall (if I am correct) that you do not invest in International stocks and bonds.
I have a two-fund portfolio consisting of VTI (total stock market) and BIV (intermediate term bond). I have no international holdings. I’ve just been keeping an eye on BIV’s monthly distributions rate as well as the current rate of inflation. The dropping yield of BIV has caused me to start investigating high-yield funds like VWEAX and ANGL. I may be overly concerned regarding the current low interest rates on quality bonds but I’d hate to get a zero real return and that’s why ANGL has popped up on my radar. My thoughts were that if the interest payments on BIV dropped below the rate of inflation then I would stop additional contributions to BIV and instead start contributing to ANGL but limit portfolio exposure to that fund to something small, like 7 or 8%. Just enough to raise the overall return of my fixed income into the positive side of real returns. My assumptions are that the best predictor of future returns in bonds is the current interest rate they pay and even some pros like Rick Ferri acknowledge a place for bonds of the high-yielding nature. Thoughts?
Last edited by birdog on Sun Nov 15, 2020 11:52 am, edited 3 times in total.
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Re: Starved & Searching for Yield???

Post by birdog »

hudson wrote: Wed Nov 11, 2020 12:14 pm BIV looks really OK compared to many alternative investments. The Trailing Twelve Months Distribution Yield is 2.34%. It's about 70% AAA/AA/A rated bonds. I'm guessing that it'll take a while to get down to 1.4%. As you know, all you've got to do is watch the monthly payout; watch for a better deal. I personally wouldn't want to go any riskier.
Thanks for the reply. Sounds like good advice.
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Re: Starved & Searching for Yield???

Post by abuss368 »

birdog wrote: Thu Nov 12, 2020 7:36 am
abuss368 wrote: Wed Nov 11, 2020 6:16 pm
birdog wrote: Wed Nov 11, 2020 11:06 am
abuss368 wrote: Tue Nov 10, 2020 6:12 pm
birdog wrote: Tue Nov 10, 2020 9:49 am

Hmmm. When I compare Vanguard Total Bond (BND) to Vanguard High Yield (VWEAX) going back to May 2007 (start of VWEAX) I show high yield beats total bond (4.43% vs 3.15%). Also, when I compare total bond (BND) to the Fallen Angel ETF (ANGL) going back to 2012 (start of ANGL) I show ANGL more than doubled total bond (7.9% vs 3.5%). Do you have data from other time periods showing high yield has an overall return that is less than total bond?
Interesting. Do you invest in those funds?
No, but I’m looking into them. If the distribution yield of my bond fund (BIV - Vanguard Intermediate Bond Index) drops below inflation (currently at 1.4%) then I’ll look at high yield funds a lot harder. The last monthly interest payment from BIV was just over 2%. I’m not interested in negative real returns in my investments. A limited amount of ANGL is a possibility. I’ve stuck to my two fund portfolio for a long time but if real returns go negative in my bond fund then I probably won’t continue to add to it. Your thoughts?
I believe is less is more. Less funds with bigger balances appears to work. My concern with High Yield bonds (and bonds in general) is higher yield almost always means higher risks.

You invest in Total Stock and Total Bond correct? In other words, I recall (if I am correct) that you do not invest in International stocks and bonds.
I have a two-fund portfolio consisting of VTI (total stock market) and BIV (intermediate term bond). I have no international holdings. I’ve just been keeping an eye on BIV’s monthly distributions rate as well as the current rate of inflation. The dropping yield of BIV has caused me to start investigating high-yield funds like VWEAX and ANGL. I may be overly concerned regarding the current low interest rates on quality bonds but I’d hate to get a zero real return and that’s why ANGL has popped up on my radar. My thoughts were that if the interest payments on BIV dropped below the rate of inflation then I would stop additional contributions to BIV and instead start contributing to ANGL but limit portfolio exposure to that fund to something small, like 7 or 8%. Just enough to raise the overall return of my fixed income into the positive side of real returns. My assumptions are that the best predictor of future returns in bonds is the current interest rate they APY and even some pros like Rick Ferri acknowledge a place for bonds of the high-yielding nature. Thoughts?
Rick Ferri is the only advisor that I am aware of on the forum you historically recommended a 20% of bonds to High Yield. That has been a number of years so I am unsure if Rick currently recommends that or has simplified.
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Re: Starved & Searching for Yield???

Post by mrmass »

Not all REITS are invested in commercial/retail.
Go over to reit.com select your sector.
https://www.reit.com/investing/reit-dir ... ive[]=7484#
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Re: Starved & Searching for Yield???

Post by Nowizard »

Is there not an argument to be made that numerous stocks with high dividends also do well with total return? Our dabbling in the past with stocks such as ATT, Verizon, MO have strongly suggested that as an outcome.

Tim
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Re: Starved & Searching for Yield???

Post by Scooter57 »

Nowizard wrote: Thu Nov 12, 2020 8:50 am Is there not an argument to be made that numerous stocks with high dividends also do well with total return? Our dabbling in the past with stocks such as ATT, Verizon, MO have strongly suggested that as an outcome.

Tim
You are picking some positive outliers there. Many other companies whose stocks paid high dividends far above a standard deviation of the market's mean interest rate have ended up cutting them. When this happens, the dividend investors sell and the price plummets. GE and KMI leap to mind. And AT&T's total return is terrible if you bought it recently. Interest rates above 4% in a stock (vs REIT) should be viewed with great skepticism. A much higher than market dividend usually goes with a price that has dropped significantly--raising the dividend yield while, of course, the actual dividend stayed the same. MO, for example, is a company that a lot of institutions won't invest in given that its product addicts and kills people, and that the marketing strategy is to addict teens in the third world to ensure a supply of future customers.

You have to dive deep into the financials of a company paying a very high dividend to know if its earnings and cash flow support its dividend going forward. There are a bunch of companies out there who have taken on large amounts of debt to finance their dividends. Even when debt is cheap it still has to be repaid.

I like the underlying idea of investing in sound dividend paying stocks, but I don't buy them in a big basket of stuff I don't know anything about (i.e. a fund or ETF.) I do buy individual dividend stocks, but as part of a 15 stock portfolio, bought to be held for 5 years. I investigate the financials and business history of each company and have been careful to select very high quality ones that I think will flourish through the next few years which I see as being ones of recession. I scaled into this portfolio, just a little every month, since last spring and so far I am quite content with my results. Since my goal has been to equal the 3% I was getting in my CDs previously I do not have to be greedy. I look for large, very well known companies whose current P/E is not significantly more than their average P/E over the past 5 years, whose earnings per share have a consistent history of steady growth, and that have a long history of paying dividends. I am not obsessed with dividend growth because sometimes there are good reasons for a company to freeze its dividend and use the money to keep the business successful.

My investment in individual stocks makes up only a bit more than 2% of my assets and replace one CD that came due this year. I will invest more if I see something that appeals to me, which right now, I don't as people hungry for yield have bid up everything with an appealing yield to where it no longer IS appealing. What is left with nice yields are companies with "issues."

That said, I have been involved in studying the minutiae of business since the 1980s, I enjoy accounting, and have been stuck in my house unable to go anywhere or see anyone for many, months, which gives me lots of time to fill. I find investing an interesting hobby that passes the time until I can go back out into the world, play my guitar, and visit my new grandchild who lives far away.

I would not suggest that people who have not spent considerable time studying stocks invest in individual stocks or risky bonds as they are much to likely to make mistakes. So unless you are dedicated hobbyist who loves reading every gritty detail about what is going on with companies, you should stay away from any kind of sector fund, both stock and bond, and as the committed Bogleheads preach, invest only in the broadest market funds.
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Re: Starved & Searching for Yield???

Post by rich126 »

I'm not opposed to buying individual stocks and sure there may be some stocks with good dividends that are solid investments but I think most of the ones with good/high dividends are probably getting bid up too high by people searching for yield.

I have some of the Wells Fargo Preferred L shares where par was $1000, 7.5% (originally issued by Wachovia) but I bought a chunk back when they were well under $1,000 (back in ~2008) and more back in March when it dipped to around $1100.

Right now it is ~$1400 with an effective yield of 5.3%. Still good especially since it won't be called anytime soon due to restrictions on it. Of course if rates rise, the price may drop and you could lose principle if you had to sell it.
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Re: Starved & Searching for Yield???

Post by abuss368 »

rich126 wrote: Thu Nov 12, 2020 4:58 pm I'm not opposed to buying individual stocks and sure there may be some stocks with good dividends that are solid investments but I think most of the ones with good/high dividends are probably getting bid up too high by people searching for yield.

I have some of the Wells Fargo Preferred L shares where par was $1000, 7.5% (originally issued by Wachovia) but I bought a chunk back when they were well under $1,000 (back in ~2008) and more back in March when it dipped to around $1100.

Right now it is ~$1400 with an effective yield of 5.3%. Still good especially since it won't be called anytime soon due to restrictions on it. Of course if rates rise, the price may drop and you could lose principle if you had to sell it.
What about avoiding individual stock risk and select a High Dividend or REIT fund?
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Re: Starved & Searching for Yield???

Post by rich126 »

abuss368 wrote: Thu Nov 12, 2020 6:59 pm
rich126 wrote: Thu Nov 12, 2020 4:58 pm I'm not opposed to buying individual stocks and sure there may be some stocks with good dividends that are solid investments but I think most of the ones with good/high dividends are probably getting bid up too high by people searching for yield.

I have some of the Wells Fargo Preferred L shares where par was $1000, 7.5% (originally issued by Wachovia) but I bought a chunk back when they were well under $1,000 (back in ~2008) and more back in March when it dipped to around $1100.

Right now it is ~$1400 with an effective yield of 5.3%. Still good especially since it won't be called anytime soon due to restrictions on it. Of course if rates rise, the price may drop and you could lose principle if you had to sell it.
What about avoiding individual stock risk and select a High Dividend or REIT fund?
Personally I wouldn't go that route but that is me. I just think there are a ton of people looking for yield and that makes most higher yield items too expensive. And that usually ends up being an expensive lesson for investors.
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Re: Starved & Searching for Yield???

Post by unclescrooge »

Schlabba wrote: Tue Nov 10, 2020 2:20 pm
FelixTheCat wrote: Tue Nov 10, 2020 1:53 pm I have a brokerage account that pays monthly dividends. I plan on using the dividends in retirement.

I wish Bogleheads had an income portfolio to live off dividends. The only thing I have found is the Income Series suggestion by Vanguard. https://advisors.vanguard.com/iwe/pdf/FASINVMP.pdf

P.S. Please don't attack me about Total Return. I simply want to design a second portfolio for income generation.
That is a great link. It basically shows vanguard's choice in the question the OP asked. I wonder why they choose 1/3rd total market and 2/3rd high dividend yield though. My initial thought was to be 50% high yield and 50% total market, but I see I am allowed to go even more towards high yield :happy . I am also planning on living off dividends.
I'm glad you're happy but did you notice the 10 percentage point difference in 1 year returns between total returns and income portfolio?
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Re: Starved & Searching for Yield???

Post by dcop »

David Jay wrote: Fri Nov 06, 2020 9:36 am Chevron dividend yield is 7%.
I wouldn't go with just Chevron or just one stock but a homemade fund with ATT, Altria, Deluxe, Coca-Cola and Chevron could work with the yields they're sporting right now. Good solid history and certainly some risk and I wouldn't make too big a part of my total portfolio but isn't that what yields all about? The days of CD's or treasuries paying anything decent are gone for at least a generation....or three.
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Re: Starved & Searching for Yield???

Post by Schlabba »

unclescrooge wrote: Fri Nov 13, 2020 9:42 pm
Schlabba wrote: Tue Nov 10, 2020 2:20 pm
FelixTheCat wrote: Tue Nov 10, 2020 1:53 pm I have a brokerage account that pays monthly dividends. I plan on using the dividends in retirement.

I wish Bogleheads had an income portfolio to live off dividends. The only thing I have found is the Income Series suggestion by Vanguard. https://advisors.vanguard.com/iwe/pdf/FASINVMP.pdf

P.S. Please don't attack me about Total Return. I simply want to design a second portfolio for income generation.
That is a great link. It basically shows vanguard's choice in the question the OP asked. I wonder why they choose 1/3rd total market and 2/3rd high dividend yield though. My initial thought was to be 50% high yield and 50% total market, but I see I am allowed to go even more towards high yield :happy . I am also planning on living off dividends.
I'm glad you're happy but did you notice the 10 percentage point difference in 1 year returns between total returns and income portfolio?
I dont look at 1 year returns. Look at the callan tables for reference.
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Re: Starved & Searching for Yield???

Post by dcabler »

abuss368 wrote: Thu Nov 05, 2020 8:45 pm Bogleheads -

There are a lot of posts regarding the very low yield environment. How it impacts retirees and investors in general.

I enjoy thinking about investment theory and portfolio construction.

If an investor selected the Vanguard Four Fund Portfolio of Total Stock & Bonds (both US and International) but wanted additional yield from dividends, what in your opinion would be the best approach?

Two things:
* I understand the “total” return approach vs. dividends so no need to reiterate that.

* I understand that only in hindsight would anyone know what strategy worked best.

So:

1) Vanguard Four Fund Portfolio and you add the Vanguard High Dividend (VYM) and International High Dividend funds (VYMI)?

* More of a large cap value play. Yields are 3.50% - 4.00%. Taxed a lower preferred qualified dividend rates of 15%. No sector risks.

0r

2) Vanguard Four Fund Portfolio and you add Vanguard US REITs and International REITs

* Separate asset class perhaps. Yields are pretty much same as US and International High Dividend. Sector risks. Not taxed as low as High Dividend funds but now qualify for QBI tax deduction. Maybe less correlation than Four Fund Portfolio and High Dividend funds.

Interested in thoughts and feedback.
Don't know how many times I've looked at REITs, but each time I see that in the US, their correlation is high to Small Cap/Small Cap value and International REITs likewise have high correlation to International small cap. And since I'm already in those spaces, I conclude that small additional diversification isn't worth it for me.
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Re: Starved & Searching for Yield???

Post by LFKB »

I own AGNC for yield

When I bought it several months ago, it was trading below book value even though 90%+ of the mortgages are government backed

The dividend yield at purchase was over 11%

The stock has gone up 40%+ since I purchased

You should take a look at it and come to your conclusion but IMO it’s a safe bet for a high yield
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Re: Starved & Searching for Yield???

Post by Carol88888 »

I have added a slug of VYM to my otherwise indexed portfolio for the need for some yield. My thought was that this fund could give more yield than any bond fund (except maybe high yield) and that the returns would be approximately the same as the S&P 500 - or a little less.

Are you prepared to take on the added equity risk? I was because I would much rather have income coming in during retirement.
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Re: Starved & Searching for Yield???

Post by unclescrooge »

Schlabba wrote: Sat Nov 14, 2020 3:22 am
unclescrooge wrote: Fri Nov 13, 2020 9:42 pm
Schlabba wrote: Tue Nov 10, 2020 2:20 pm
FelixTheCat wrote: Tue Nov 10, 2020 1:53 pm I have a brokerage account that pays monthly dividends. I plan on using the dividends in retirement.

I wish Bogleheads had an income portfolio to live off dividends. The only thing I have found is the Income Series suggestion by Vanguard. https://advisors.vanguard.com/iwe/pdf/FASINVMP.pdf

P.S. Please don't attack me about Total Return. I simply want to design a second portfolio for income generation.
That is a great link. It basically shows vanguard's choice in the question the OP asked. I wonder why they choose 1/3rd total market and 2/3rd high dividend yield though. My initial thought was to be 50% high yield and 50% total market, but I see I am allowed to go even more towards high yield :happy . I am also planning on living off dividends.
I'm glad you're happy but did you notice the 10 percentage point difference in 1 year returns between total returns and income portfolio?
I dont look at 1 year returns. Look at the callan tables for reference.
I would be amazed if the income portfolio matched the returns of the total return portfolio over an period of time.

But as they, you do you.
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Re: Starved & Searching for Yield???

Post by David Jay »

dcop wrote: Sat Nov 14, 2020 1:17 am
David Jay wrote: Fri Nov 06, 2020 9:36 am Chevron dividend yield is 7%.
I wouldn't go with just Chevron or just one stock but a homemade fund with ATT, Altria, Deluxe, Coca-Cola and Chevron could work with the yields they're sporting right now. Good solid history and certainly some risk and I wouldn't make too big a part of my total portfolio but isn't that what yields all about? The days of CD's or treasuries paying anything decent are gone for at least a generation....or three.
I wasn't actually suggesting that as a portfolio, but to make the point that there is a lot of yield available if one is willing to move out of the "fixed income" category.

I am very concerned about the number of people who are chasing yield and willing to consider really "iffy" vehicles. In a lot of cases they would be better served by increasing the stock percentage of their AA.
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Re: Starved & Searching for Yield???

Post by RAchip »

If you need to draw income from your equity portfolio, the question is which strategy is better: (1) hold a broad index fund (s&p etc) take the dividends it pays (current dividend yield of s&p is about 1.7%) and sell bits now and then to generate the additional cash you need, OR (2) hold a fund focused on producing relatively high dividends (or a portfolio of higher dividend paying stocks you pick yourself) that produces enough dividends to meet your cash needs so that you dont need to sell anything. The contention I hear the most is that strategy (1) is better because you are most likely to die with a bigger portfolio using that approach. My opinion is that (1) is better than opting for a high dividend fund with its higher fees and the yields from “high” dividend funds arent really high enough anyway. However, I think if you have time and patience you can slowly build your own individual stock portfolio that produces the desired level of dividends so that you dont have to sell. It takes a while because at any given time there usually arent enough really desirable stocks paying “high dividends.” You have to build a list of targets and wait. A recent example I give is that UPS stock dropped earlier this year to a level where its dividend yield was 5%. If this stock was on your radar, you would have loaded up (as I tried to do). Another example os WMT. A few years ago its stock fell to a point where its dividend amounted to a yield of over 3%. Similarly, MSFT was yielding over 3% at one point. WBA had recently fallen to a level where its dividend yield was over 5%. And on and on and on. If you are patient, you can assemble a portfolio of great companies that throws off dividends in the range of 4-6% or more of the amount you invested. But it takes work and time. I think this strategy can produce a better outcome than just employing strategy (1) above but I accept that for the general population strategy (1) is probably the beat option.
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Re: Starved & Searching for Yield???

Post by unbiased »

EfficientInvestor wrote: Sun Nov 08, 2020 11:01 pm Sell call options against some of your current holdings.
^this^

I use TLT for this purpose. Highly liquid options market, plus unlikely at this point that the trend leads towards higher LT treasury prices, but who knows.

If the price pops and your shares are called, you can then sell puts and continue collecting income until the share price drops back to the price you want (wheeling).

I've been doing this in my IRA and it boosts my TLT yield a good 5-7%. It also requires very little work, maybe 10 minutes a week max.

But as others have said, there is no "free lunch" -- the downside is that you may lose capital appreciation potential if treasuries rise.
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Re: Starved & Searching for Yield???

Post by birdog »

Scooter57 wrote: Thu Nov 12, 2020 10:15 am I do buy individual dividend stocks, but as part of a 15 stock portfolio, bought to be held for 5 years.
I'm curious what your 15 stock portfolio is. Care to give the tickers?
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