Your Survival Guy recently made a six-figure addition to my dividend-centric portfolio. Does that mean every single position pays a dividend? Not necessarily. It just means I favor dividend-payers over non-dividend-payers. On the fixed income front, I have plenty for my age (52 years), with some gold as part of the mix. When you’re in your 50s, you want to build in some stability with bonds. As you get closer to retirement, I like the idea of gradually increasing that percentage. You need to figure out the right mix for you as you build your retirement plan. Action Line: In my … [Read more...]
The Chickens Will Come Home to Roost
When your pharmacist knows more about Nvidia than pills, we might have a problem. That’s the nature of runaway stocks. They pull everyone in because “this time, it’s different.” But at what price? Your Survival Guy’s seen this movie before. Three times already this century, it ended with heartache and blame. No one likes losing money, and no one likes to admit they were wrong. But wrong they were in thinking there wasn’t any risk in chasing performance and yield. Take a look at the chart of the 5-year treasury yield below. That’s as good a measure as any of the increase in the cost of … [Read more...]
Inflationary Stimulus Programs Hurt Poor Americans the Most
All these government programs intended to “help” do nothing to make one more self-reliant. The federal government and the Federal Reserve went stimulus-crazy, and as is normally the case, that hurt the least wealthy Americans the most. Inflation is a transfer of wealth to the government and to those with hard assets. James Mackintosh reports in The Wall Street Journal: Inflation hurt low-income households more. The cost of food, energy and rent rose far more than other items after the start of the pandemic, and made up a bigger share of consumption for the poor. Inflation experienced by the … [Read more...]
Boiled Frogs: Lulled to Sleep by This Market
Run your finger along the 5-year treasury line in the chart above, and you immediately get a sense of where we’ve been. As you can see above falling interest rates were a boost to bonds and stocks. This efficient frontier is a combination of bond returns based on the ICE BofAML 7-10 Year U.S. Treasuries Index and stock returns based on the total return of the S&P 500 Index from 1978 to 2023. In the above, you’re looking at the 5-year treasury before the tech bust and then when it hit up to now. The efficient frontier above is from the same time period. This one … [Read more...]
Is Too Much of Your Portfolio Invested in Stocks?
As you know from my work here on the efficient frontier, how you invest can be as important as what you invest in. I’m a fan of target maturity funds because they take care of the allocation as one ages. Oftentimes, investors get to retirement and all of a sudden realize too late that they have too much of their portfolio invested in stocks. Target date funds aren't perfect, though. I do have concerns about the overlap of these funds and the glut of money in only a handful of stocks. Below you can see the biggest holdings of some of America's largest target date funds from different … [Read more...]
Are You Balancing Risk and Reward?
You can learn about risk and reward by looking at efficient frontiers and understanding that effective allocations between stocks and bonds can both increase return and reduce risk. Are you getting an effective allocation from your investment advisor? In 1830, Justice Samuel Putnam wrote the decision in Harvard College vs. Amory that enshrined the Prudent Man Rule. In the September 2015 issue of Richard C. Young’s Intelligence Report, Dick Young wrote of Putnam and the Prudent Man: The Prudent Man Rule is based on common law stemming from the 1830 Massachusetts court formulation Harvard … [Read more...]
Time to Flee Stocks for Bonds? Your Frontier
How you invest in stocks and bonds, in other words, your asset allocation can mean more to your investment success than what you invest in. Let me explain. When you look at risk/reward as measured by my efficient frontier, you can see by the fish hook how having your eggs in one basket can mean more risk. Obviously, 100% in stocks will be riskier as measured by a portfolio’s ups and downs or standard deviation. But what’s not always clear is that having 100% in bonds can be riskier than a mix of, say, 20% stocks/80% bonds. As you see above, this efficient frontier is a combination of … [Read more...]
ESG Pushback Lands in Europe
You have watched as American politicians and business leaders have pushed back against the ESG movement to protect shareholder returns. Now, the movement to put shareholders ahead of politics has made it to Europe. Niall O'Shea and Hugh Wheelan report for Reuters: March 14 - Ignored, ridiculed, embraced, sanctified, attacked. If you’ve been living it for long enough, it’s hard not to see the grim humour in the parable of ESG. That catch-all term, which covers “sustainable”, “responsible” and “impact” investment, is nursing a splendid hangover, and having to contemplate the consequences of … [Read more...]
“And I’ve Never Forgotten,” His Nephew Told Me
You never know when you’re going to pick up a nugget of wisdom. Wisdom that can last a lifetime. In a world loaded with information, wisdom is in short supply. Don’t confuse the two. Your Survival Guy was speaking with a client this week. He’s in his early sixties, and he’s ready to retire in a year or two. We talked about his portfolio, his savings, his 401(k) that he’ll roll over to Fidelity, his asset allocation, and how we’ll transition it when he needs to begin drawing from it. “You know how I feel about asset allocation and the efficient frontier,” I said. “I know you’ve been … [Read more...]
Your Retirement Life: Walk Like a Modern Day Warrior
Looking over your shoulder is no way to live. Wondering who's behind you. Wondering if you're safe. Feeling uncertain. Uncomfortable. It's scary. Instead, walking with your head up, eyes forward, and shoulders back is the stride of the modern-day warrior. You never tire. You have the same confidence tomorrow as you do today. You're comfortable with who you are. You don't worry about the other guy. You stick to your game. We make enough tough decisions in a day to keep our lives too busy. Take figuring out "what to watch tonight?" for example. It can shake one's confidence. Then, finding … [Read more...]
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