When stocks and bonds do not give anything – or how to make money work
Historically, that sometimes there were periods when the dividend yield of the stock market was very low. There have also been instances where a long time bondholders received a very modest income from its securities. And then, and another goal at the moment investors in a difficult position.
Charles Farrell, CEO of Northstar Investment Advisors, considered that if his portfolio contains equal shares list S P 500 and the medium-term government bonds, they would give a yield of 1.67% last year and is projected – 1.85% this year. But in 1925, the owner would have received from the same 4.3% income portfolio.
The thing is that
stocks and bonds, which give us
Now less income, we need to make
work that they bring us money.
He estimated that if, within the next
decades portfolio will also share
equally between stocks and bonds,
total revenue from it will be about
2-2.5 percentage points per year more than
inflation. With inflation at 2.1%
the last 12 months (compared to
average 3%) current low income
from stocks and bonds are not as worried,
as it seems, "even if both the market
will grow by 30% and give more inflated
with cash flows in terms of income".
Medium-term government bonds
(Five-year) currently provide
income by 1.8%. You get meager returns
yields below the inflation rate, and you
could suffer if interest
rates have sharply increased. What is the profit of 1,9%
for S P 500? Investors seem to be less
outraged by this, that, in part because
companies themselves aggressively buying back its
shares, which gives a chance to return the money
Over the past ten
years the company bought enough
the number of shares to compensate
new release. This change is historic
template when shareholders collectively
see its stake diluted to several
again – by about two percentage points
in year. And it becomes not clear whether
continue the pace of foreclosures. Companies have already started
free use corporate
cash to buy back shares,
partly because they are reluctant
at great expense. However, low
costs can not be sustained. Besides
addition, the timing of these ransoms sometimes frightening.
For example, companies selling more
volumes of stocks at the market peak in 2007, and
then sharply “cut” back to their
during the collapse in 2008 and 2009, and now again
sell these shares.
stock market investors
also not so much concerned about the tiny
dividend yield, because
they have become accustomed, that dividends provide
through the sale of shares. In fact, in
Falling equity markets, as a rule,
better not to go, while
high-yield stocks is often better to keep
profitability. There is a more fundamental
question: how to make money from the company,
which will never return money
shareholders, and you depend on someone
another who pay more for their shares,
what you have done so.
repay their debts. Suppose
you have a mortgage loan worth
5%. It seems “cheap” money.
But the pace and scale of the impact is likely to
higher than the return of your bond,
so it makes sense to sell bonds
to repay the mortgage loan.
And what to do with your
portfolio? Given the investment
costs and minimize
Investment tax bill, you
We should keep more than the markets provide.
It turns out obvious: save more.
"if you have
$ 500,000 in a portfolio with a yield of 4%, you
add $ 20,000 annually
as income portfolio"notes
Farrell. "But if it will only
2%, you add only $ 10,000 per year. that
compensate for the loss, you should pay more
and save, you might want to share,
that will give you more income".
Farrell proposes to reduce the risk of
bonds through the purchase of securities with less
term, higher-quality bonds,
and more funds to invest in shares,
including stocks of companies that regularly
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