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Old 03-27-2011, 07:00 AM   #61
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No good choices really. Best I can come up with is:

1) Personal spending is your biggest lever, economise where you can
2) Blue Chip dividend stocks, American Electric Power (AEP) is yielding 5.4%
3) Location. If all else fails, consider moving to a lower cost of living area. Second cousin to #1

OK, flame away
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Old 03-27-2011, 07:34 AM   #62
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Conservative portfolio mix options I currently use are:

- VCVSX, VG convertible fund
- BKT, closed end fund mostly loaded with agency mbs
- JQC, CEF owning preferreds and debt, much of it convertible
- ACG, CEF owning mostly treasuries, agencies and agency MBS
- FOF, CEF which owns other CEFs
- MERFX, merger arbitrage fund
- ARBFX, merger arbitrage fund
- LCMAX, long/short bond fund
- PCRDX, commodity futures fund
- CDs with a halfway decent rate when I can find it

All of the CEFs trade at fat discounts to NAV. I wish there were a better alternative to commodity futures funds that would give commodity exposure without doing so via commodity producer equities.

As always, do your own DD, YMMV and consult your proctologist before...
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Old 03-27-2011, 08:01 AM   #63
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We REALLY don't want to go back to work so we're trying to be very risk averse. We only have 25% equities but if the market goes down 75% and stays that way for 20 yrs like Japan we'll still be OK. Also our withdrawal rate (2.6%) is relatively low. Maybe you shouldn't time the market but it feels good having a large amount in short dated CDs right now.
Of course we're taking greater inflation risk but we don't have a huge amount in long bonds.
We also live in a low tax area and could cut way back on our expenses if necessary. We also have an off grid solar system, garden, fruit trees,goats and chickens. Our homestead takes some work but we enjoy it.
The world isn't coming to an end but I can't help but think the printing and borrowing is leading to yet another bubble. This could end badly.
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Old 03-27-2011, 08:09 AM   #64
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The world isn't coming to an end but I can't help but think the printing and borrowing is leading to yet another bubble. This could end badly.
This is a good argument for owning equities and a good reason to NOT own a lot of bonds and cash--or anything denominated in a fixed dollar amount.

Equities are "denominated" in a percentage of the company, so inflation will not have much of an effect on the actual buying power of your equity assets.
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Old 03-27-2011, 08:25 AM   #65
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Brewer, For the benefit of everyone else will you please be more specific describing real examples of stocks, bonds etc. For example, I will recommend buying dividend paying, stocks, mutual funds & preferred ETF'S----PGF, PFF, DLTNX, GAUCX, NLY, AGNC, FTR, MO, GUT, HYG etc. All these pay > 6% dividends. I own most of these and am continuously looking for new ideas.
Thanks
A risk averse investor will probably not be into buying high-dividend paying stocks because they are still much riskier than bonds. Larry Swedroe and his colleague Jared Kizer put this together to show why:
Why a High-Dividend Stock Strategy Isnít a Good Approach - CBS MoneyWatch.com
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Old 03-27-2011, 08:33 AM   #66
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RAYVT- That might be the case in times of inflation or it might not. The stagflation of the 70's was brutal for stocks and long bonds but if you had short bonds you had options. However you sound comfortable with your asset allocation and that is probably the most important factor. If you didn't sell at the bottom in 2008 you can "stay the course". I didn't sell either but for me personally if I had-60-70% equities in 2008 I wouldn't sleep well and might have sold at the bottom as I saw my retirement evaporate. The market came roaring back with Uncle Ben's help but there is no guarantee in this world.
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Old 03-27-2011, 09:47 AM   #67
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6. Accept a lower standard of living.
Been there, doing this.

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A risk averse investor needs to minimize the risk of portfolio loss. Accept the lower yield, protect principle, and wait for an opportunity. This time is not different and the opportunities will be there.
Agree. I do own a chunk of dividend stocks and a sprinkle of investments as shown by Brewer. But a lot of boring cd's. Some with decent yields, but also maturing over the next 12 months. Guess I will just have to accept the low rates and buy more rice and beans.
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Old 03-27-2011, 10:19 AM   #68
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Conservative portfolio mix options I currently use are:


As always, do your own DD, YMMV and consult your proctologist before...

The best investment advice.
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Old 03-27-2011, 12:15 PM   #69
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All of the CEFs trade at fat discounts to NAV. I wish there were a better alternative to commodity futures funds that would give commodity exposure without doing so via commodity producer equities.
I like the PIMCO fund as well but it is hard in a taxable portfolio. Perhaps DBC or GSG?
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Old 03-27-2011, 12:17 PM   #70
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and consult your proctologist before...
I did. He said the outlook was sh!tty.
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Old 03-27-2011, 12:38 PM   #71
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A risk averse investor will probably not be into buying high-dividend paying stocks because they are still much riskier than bonds. Larry Swedroe and his colleague Jared Kizer put this together to show why:
Why a High-Dividend Stock Strategy Isnít a Good Approach - CBS MoneyWatch.com
We should emphasize that a strategy of buying high quality companies with growing dividends is not the same as a high dividend approach, which last approach often gathers some pretty shakey companies.

Also, Swedroe's critique emphasizes the greater volatility of the dividend approach when compared to the quality bond approach. He then compares high dividend returns to returns of various other "value stock strategies", something he seems to have pulled out of a hat. He does not compare dividend returns to quality bond returns, he only contrasts risk which he accepts as identical to volatility. Implicit in the emphasis on volatility is that the investor must regularly go to portfolio sales for living expenses. But this is often not the case with dividend oriented investors on this board. They buy and hold, selling a stock only for quality or relative value considerations, not to gain cash for living expenses.

Ha
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Old 03-27-2011, 12:40 PM   #72
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Stable Value Fund in a 401K. I am getting 3.7 percent in my 401k Stab Val Fund, which I am happy with as a risk-adverse investor. I have 85 % of my 401k money in the Stab Val Fund. The rest I "gamble" with, since I can't stand to think of inflation hosing me, with commodities (PCRIX) , REIT (PRRSX), bonds (PTRAX) and Wellesley conservative allocation blend fund (VWIAX).
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Old 03-27-2011, 12:52 PM   #73
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A risk averse investor will probably not be into buying high-dividend paying stocks because they are still much riskier than bonds. Larry Swedroe and his colleague Jared Kizer put this together to show why:
Why a High-Dividend Stock Strategy Isnít a Good Approach - CBS MoneyWatch.com
Good article to link to, LOL. High dividend (and even good quality, low payout) stocks have been around for decades. There must be some reason why some very bright people have suggested that such stocks belong on the equity side of the portfolio. Maybe it's because they are equity. Most of us do not want high volatility in our entire portfolio.
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Old 03-27-2011, 01:18 PM   #74
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If you didn't sell at the bottom in 2008 you can "stay the course". I didn't sell either but for me personally if I had-60-70% equities in 2008 I wouldn't sleep well and might have sold at the bottom
The best advice I ever got along thise lines was from my Dad. He told me that the worst mistake they had ever made was to panic and sell all his stocks the day after Black Monday in Oct'87.

Was it fun losing almost half my portfolio value? No.
Did I lose any sleep? No.

Women are usually very risk-averse, but my wife has a unique philosophy. "We were broke when we got married, so the worst that can happen is we go back to just like when we started. Except now we know how to invest properly, so we'll be able to skip 20 years of experimentation and learning."
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Old 03-27-2011, 02:50 PM   #75
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All these funds with 9+% returns sound great, but I wonder what kind of stuff they own to do it. FTR was mentioned with a 9.3% return but a Debt/Equity ratio of 159 and a payout ratio of over 350%. Tough to get away from that old risk/reward ratio thing.
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Old 03-27-2011, 03:39 PM   #76
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35/65 equities/fixed income

stable value fund 3.45% yield

this year i'm going to view the work in my garden growing food as a financial move vs a pia due to all the work (which is what i've come to see it as lately), it always saves me a ton of money but i won't be whining about the work this year!
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Old 03-27-2011, 04:01 PM   #77
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My rental property will net me $20k a year in ER. Over the years I might have done better investing the mortgage money in the stock market, but I've decoupled it completely from those markets and the stable income stream is worth a lot. Even in the worst of markets it will provide base income and once SS starts my expenses will be covered without needing to tap any investments. So I go into another accumulation phase post 66.
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Old 03-28-2011, 08:45 AM   #78
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- MERFX, merger arbitrage fund
- ARBFX, merger arbitrage fund
What's the merger-arb market like these days? It tends to be cyclical, and I've been out of the game long enough to have lost touch.
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Old 03-28-2011, 08:59 AM   #79
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What's the merger-arb market like these days? It tends to be cyclical, and I've been out of the game long enough to have lost touch.
These funds have a generally very conservative approach with exposure to as large a number of deals as they can manage to. Returns are sort of mid to high single digits annually, with pretty low volatility. Asset bloat is a potential concern, but with M&A activity picking up its less of a concern than otherwise might be the case.
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Old 03-28-2011, 09:12 AM   #80
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I'm going to go out on a limb here and suggest a little market timing. Suppose you have a 50/50 allocation. Maybe boosting this to 55/45 or 60/40 for a few years makes sense. We are still only 2 years into a recovery and the Fed plus other world governments are making it painful to avoid some risk. So maybe you should take the bet.

To avoid the inevitable future bear market you will have to define some rules or develop an algorithm. I know for personal experience this is a tough task. Some would say it is impossible.

Anyway, just some (somewhat controversial) thoughts for a rainy morning here.
I agree with this. Increase equity positions during bull markets and decrease them during bear markets.

During the financial crisis, I used a "dollar cost averaging down" technique that was outlined in Errold Moodys book "No Nonsense Finance" I felt better knowing I had a plan. His book is a good read. You will even chuckle..and laugh thru his points.
Point is ...some of us dollar cost average up...so ..why not dollar cost average down depending on how far down things go? He gives percentages and quidelines...so one doesn't loose but so much.

What is interesting to me...is if you loose 50%....you have to subsequently make 100% to make it up.
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