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Old 12-23-2015, 08:06 PM   #21
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Where did you read that it is high risk?
look up vpu
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Old 12-24-2015, 04:21 AM   #22
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More risk more reward.
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Old 12-24-2015, 05:32 AM   #23
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Originally Posted by bingybear View Post
It invests in stocks. These stocks are less diversified then VOO and the like since it covers one sector. 82 stocks. The majority are electric multi-utilities.

Less diversification increases risk.
In addition, VPU is down 8% YTD. That does not always happen, of course, but this year you would have been better off in cash. If interest rates rise further, it would likely drop more.
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What would you do with 250K in cash?
Old 12-24-2015, 07:12 AM   #24
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What would you do with 250K in cash?

With regards to risk...
Yes a full world stock fund is highly diversified and lest risky then a dividend paying utility fund but that full world fund only pays 1% dividend.

I use a simplified Warren Buffet like approach when I do dividend investing
1. Do I understand what they do? A: Yup they make electricity
2. Do they have a monopoly? A: pretty much
3. Is there easy entrance to the market? A: no it cost a fortune to build a power plant
4. Did they pay dividends during the worst of times?
Answer: go to yahoo finance, type in Vpu, then choose historical prices on the left then click the dividends only.

http://finance.yahoo.com/q/hp?s=VPU&...=24&f=2015&g=v

The price of Vpu took a hit in 2009 like nearly every other stock. But! what do you know they paid hefty dividends in 2009. That's what I care about. I guess my evaluation of risk is based on: How likely I'd it that they will pay me. And my investing horizon is Long Term so I not worry about how the market chooses to price my income stream fund today... I do diversify but with an eye towards dividends..

Simple yes, flawed arguably.. But it has worked for me.
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Old 12-27-2015, 07:46 AM   #25
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Where did you read that it is high risk?
On Vanguard's website, when you research any fund they display a "risk potential" graph, illustrating the relative risk of the particular fund.

For example, the money market fund (VMMXX) gets a #1, all the way to the left, which means "less risk, less reward"...

The VPU gets the opposite ranking, all of the way to the right "More risk, more reward" which is the highest risk potential grade they give.

The STAR fund which is a collection of indexed funds, allocated 60-40 stock-bond, gets a rating right in the middle,half-way.

So this may not mean it's "high risk" compared to betting on horses, or penny-stocks, but relative to other conservative investments.

The question I mean to ask is this: to what market circumstances is this fund exposed to risk? What makes public utility stocks go up, or down?
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Old 12-27-2015, 08:34 AM   #26
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Not that I am watching anything but long term dividend income streams but

Clearly interest rate swings could adversely affect prices - put simply if CDs were paying 6% why would I buy a utility fund with a 4% yield? Inflation could also temporarily affect prices...
None of which you or I can predict or control.



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Old 12-27-2015, 08:46 AM   #27
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On Vanguard's website, when you research any fund they display a "risk potential" graph, illustrating the relative risk of the particular fund.

For example, the money market fund (VMMXX) gets a #1, all the way to the left, which means "less risk, less reward"...

The VPU gets the opposite ranking, all of the way to the right "More risk, more reward" which is the highest risk potential grade they give.

The STAR fund which is a collection of indexed funds, allocated 60-40 stock-bond, gets a rating right in the middle,half-way.

So this may not mean it's "high risk" compared to betting on horses, or penny-stocks, but relative to other conservative investments.

The question I mean to ask is this: to what market circumstances is this fund exposed to risk? What makes public utility stocks go up, or down?
Yes, more risk more reward, but not high risk. My previous post pointed to that. The red warning bubble on VG site for this sector is not as useful as, say, a purple bubble. It also must be true that over time this rating changes. At this moment in time, with the constant badgering of investors with interest rate "threats" the attractiveness of utilities has waned. What color would that bubble be at the depth of the great recession? It would still not slide as far to the left as VG MM, but I don't think it would be at level 5 with a red bubble.

If you search public utility sector, as with all sectors there is too much information to digest. However, start with Fidelity or Schwab, just because I am a little familiar with the sites, you'd find at least a day's reading on the sector.

I start here when I want to read about a sector:

https://eresearch.fidelity.com/erese...n_market.jhtml


Any prospectus would also give you detail about market factors for that investment.
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Old 12-27-2015, 08:52 AM   #28
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Not that I am watching anything but long term dividend income streams but

Clearly interest rate swings could adversely affect prices - put simply if CDs were paying 6% why would I buy a utility fund with a 4% yield? Inflation could also temporarily affect prices...
None of which you or I can predict or control.
Another factor that pops up is a particular utility's investment pattern. Shied away from coal, built a nuclear plant that will not start when you push the button, or went whole hog into coal!

Your simplification of utility yield vs CD yield is the one factor I hear in most articles.

My deep analysis is to invest in DUK and SO, as the south is expanding, it's really hot, and consumers need A/C, computers, and internet in retirement...
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Old 12-27-2015, 08:57 AM   #29
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In India, you may put the excess cash safe and earn tax free returns by investing in tax free bonds which are currently yielding about 7.5% tax free returns. They are for 10 to 20 years. Easy liquidity as these can be traded in secondary market.

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What would you do with 250K in cash?
Old 12-27-2015, 09:10 AM   #30
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What would you do with 250K in cash?

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My deep analysis is to invest in DUK and SO, as the south is expanding, it's really hot, and consumers need A/C, computers, and internet in retirement...

Sometimes keeping it simple is the way to go. We've owned Southern company so long that I had to turn the dividend reinvestment off. It was just too much concentration risk. There's nothing like those quarterly dividends year after year. LUV it.


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Old 12-27-2015, 09:49 AM   #31
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On Vanguard's website, when you research any fund they display a "risk potential" graph, illustrating the relative risk of the particular fund.
That works over a short period of time.
Over the long period of time Cash is most risky investment and Equities are least risky.
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Old 12-27-2015, 10:08 AM   #32
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To answer the OP question, with 250K in cash over and above my well designed portfolio, I would invest in utilities, energy, Healthcare, technology and telecom sectors. Would identify 2 companies in each sector and take a year or two to invest.
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Old 12-27-2015, 10:13 AM   #33
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Originally Posted by HadEnuff View Post
On Vanguard's website, when you research any fund they display a "risk potential" graph, illustrating the relative risk of the particular fund.



For example, the money market fund (VMMXX) gets a #1, all the way to the left, which means "less risk, less reward"...



The VPU gets the opposite ranking, all of the way to the right "More risk, more reward" which is the highest risk potential grade they give.



The STAR fund which is a collection of indexed funds, allocated 60-40 stock-bond, gets a rating right in the middle,half-way.



So this may not mean it's "high risk" compared to betting on horses, or penny-stocks, but relative to other conservative investments.



The question I mean to ask is this: to what market circumstances is this fund exposed to risk? What makes public utility stocks go up, or down?

Utility stocks are tethered to bond yields from 2 different angles. They do compete with bond proxies in the marketplace so when bond yields rise, utilities can fall. But the other side is the borrowing costs of utilities. Typically 50% of capital structure is tied into debt. Debt is more expensive when rates rise thus profits can decline.
Electric Utilities are not the slam dunk safety of yesteryear...Deregulation, rates for power producers less reliable, electrical growth rates nearing zero through efficiency programs, and solar usage. "Stranded assets" could be a problem in the future.
Personally around 70-80% of my entire money is in Utility preferred stocks, not common stock. Those dividends yield about 50% higher than common ute stock dividends, plus they are higher safety in payout.
Plus as an additional measure of security most of mine are in transmission and distribution utilities that do not own or produce power. Although I own a small amount of one common stock utility, and am big into electric utilities for high yield, I have no interest in a utility common stock index fund.


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Old 12-27-2015, 10:40 AM   #34
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Thanks, all, for the information. I appreciate it.
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Old 12-27-2015, 12:24 PM   #35
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I'm in almost the same position. Full 100% pension that I can easily live off the rest of my life, a million in various stock investments, but I also have $250,000 in cash that I keep in various bank accounts collecting a whopping 1%.

Some people might think I'm crazy but I know that $250,000. will always be there.
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Old 12-27-2015, 01:20 PM   #36
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I'm in almost the same position. Full 100% pension that I can easily live off the rest of my life, a million in various stock investments, but I also have $250,000 in cash that I keep in various bank accounts collecting a whopping 1%.



Some people might think I'm crazy but I know that $250,000. will always be there.

Sounds like a very prudent plan to me. Its not like inflation is running 20% while you are collecting that 1% on the extra funds.


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Old 12-27-2015, 01:56 PM   #37
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What would I do? Well, bear in mind that I am not one to chase yield. Here is a nice, dull, boring allocation for it, guaranteed to put you to sleep, but also to allow you to do nothing so you can get back to enjoying life:

$60,000 VBTLX Vanguard Total Bond Market Index Fund
$90,000 VWIAX Vanguard Wellesley
$62,500 VTSAX Vanguard Total Stock Market Index Fund
$37,500 VFWAX Vanguard All-World Ex-US Index Fund
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Old 12-27-2015, 02:06 PM   #38
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Id keep 150 in cash as I like 3 yrs living exp in cash. I'd take the 100k and add it vanguard high div yield idx.


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