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Vanguard’s Investment Advice in a Low Yield World

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Vanguard ‘s head of investment strategy and global chief economist Joseph Davis gives some advice to investors in a low yield world, don’t be a hero. Bloomberg writes:

“The next five years are going to be more challenging than the previous five years in investing,” said Joseph Davis, head of investment strategy and global chief economist at Malvern, Pennsylvania-based Vanguard, which oversees $3.8 trillion. “Be cautious of trying to be heroic in this environment.”

Vanguard’s global head of fixed income, Gregory Davis, echoes his colleague’s sentiments.

Given the uncertainty still facing the global economy, Vanguard’s global head of fixed income, Gregory Davis, cautions investors against ditching the safety of bonds in a search for returns in assets such as real estate investment trusts and high-dividend yielding stocks.

“That’s an extremely dangerous game,” he said in the interview. “They don’t have the defensive characteristics of high-quality bonds. They’re taking on undue risk that they’re not necessarily appreciating.” …

“My main concern is, and what we’re trying to make sure investors recognize, is that just given where we’ve been over the last several years, there’s been this tendency to take more and more risk,” he said.

You can see on the chart below that the yield of the S&P 500 remains depressed today.

sandp-dividend-yield

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E.J. Smith - Your Survival Guy

E.J. Smith is Founder of YourSurvivalGuy.com, Managing Director at Richard C. Young & Co., Ltd., a Managing Editor of Richardcyoung.com, and Editor-in-Chief of Youngresearch.com. His focus at all times is on preparing clients and readers for “Times Like These.” E.J. graduated from Babson College in Wellesley, Massachusetts, with a B.S. in finance and investments. In 1995, E.J. began his investment career at Fidelity Investments in Boston before joining Richard C. Young & Co., Ltd. in 1998. E.J. has trained at Sig Sauer Academy in Epping, NH. His first drum set was a 5-piece Slingerland with Zilldjians. He grew-up worshiping Neil Peart (RIP) of the band Rush, and loves the song Tom Sawyer—the name of his family’s boat, a Grady-White Canyon 306. He grew up in Mattapoisett, MA, an idyllic small town on the water near Cape Cod. He spends time in Newport, RI and Bartlett, NH—both as far away from Wall Street as one could mentally get. The Newport office is on a quiet, tree lined street not far from the harbor and the log cabin in Bartlett, NH, the “Live Free or Die” state, sits on the edge of the White Mountain National Forest. He enjoys spending time in Key West and Paris. Please get in touch with E.J. at ejsmith@yoursurvivalguy.com