So what is a risk averse investor to do?

[veremchuka]

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!

 

[nun]

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.

 

[Gone4Good]

- 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.

 

[brewer12345]

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.

 

[sheehs1]

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.

 

[DblDoc]

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

Thus adding manager risk (the guy/gal in the mirror) to the equation. TANSTAFL.

DD

 

[haha]

Thus adding manager risk (the guy/gal in the mirror) to the equation. TANSTAFL.

DD

I suppose that is true. But if you can trust yourself to care for severe trauma, design a circuit on which many million $$ will be spent, or manage billion $$ contracts or just drive down a two lane mountain road with your kids on board which many of us have done, couldn't you trust yourself to pick out 10-15 companies and keep track of them?

Ha

 

[kcowan]

...add in stuff like convertible bonds,....

One thing you may not have seen is MAPF, a preferred share fund run by a Toronto-based Canadian. His returns are amazing and in C$ which are not too shabby these days. See prefblog.com for details. He certainly earns his MER.

I also agree that convertibles are an interesting combo of good yields now combined with inflation protection. It is all I have been purchasing with the equity from some real estate sales before the decline.

 

[Stevewc]

Also helps to be scanning for the occasional fat pitch, like the fluke Pen Fed 5% CD offer last year.

You just had to bring this up didn't you?
I opened a new account.
Got a credit card with penfed.
Opened a small CD.
Pulled every trick I could think of and still didn't get an invite to the 5% CD.
Envious of you guys that got in,
Steve

 

[Spanky]

You just had to bring this up didn't you?
I opened a new account.
Got a credit card with penfed.
Opened a small CD.
Pulled every trick I could think of and still didn't get an invite to the 5% CD.
Envious of you guys that got in,
Steve

I did not get an invite also.

 

[nun]

You just had to bring this up didn't you?
I opened a new account.
Got a credit card with penfed.
Opened a small CD.
Pulled every trick I could think of and still didn't get an invite to the 5% CD.
Envious of you guys that got in,
Steve

FYI in the UK banks are offering 4.4% on 4 year savings accounts (UK equivalent of CDs). I've noticed that fixed interest rates on saving/CD type
accounts tend to be higher in the UK than the US. As I plan to ER in the UK it looks like my cash bucket will be in a UK savings account. This has the added benefit of being in the local currency.

 

[traineeinvestor]

FYI in the UK banks are offering 4.4% on 4 year savings accounts (UK equivalent of CDs). I've noticed that fixed interest rates on saving/CD type
accounts tend to be higher in the UK than the US.

With the UK's official inflation rate expected to pick up to 4-5% in the mid term, 4.4% before tax is not that good a deal (unless you have a positive view on the currency): Bank of England | Publications | Main Publications | Inflation Report | Latest Overview - February 2011

 

[traineeinvestor]

The Credit Suisse 2011 year book has an interesting discussion on the relevance of yield on investment returns. They (and the academics quoted) looked at data from 21 countries, some going back 111 years (some for shorter periods) and divided the listed stocks into (i) those which paid no dividends (ii) those which paid low dividends and (iii) those which paid high dividends.

Accross the 21 countries surveyed, there was a fairly consistent conclusion that the high dividend stocks produced better returns and that those better returns were not explained by either tax effects or risk. In fact the higher yielding stocks were less risky than the low yield/no yield stocks.

https://infocus.credit-suisse.com/a...nvestment_yearbook_2011.pdf&ts=20110324030332