What is your "yield"

[phil70]

I'm trying to get an idea of what a reasonable "yield" is on my investment portfolio. By that I mean income (dividend & interest) over value (not yield on cost) of your overall investment portfolio (which for me excludes emergency cash and checking account balance). Last year my yield was just below 2%. That sounds reasonable to me because I am still 10 years from our FIRE goal and I am 70/30 stocks/fixed income. I have no particular focus on dividend stocks or high income investments.

In the future, I would like to get more income from our portfolio, so I'm curious what other people have been able to achieve.

Thanks in advance.

 

[Sea Kayaker]

About 6%.

 

[mrfeh]

I'm trying to get an idea of what a reasonable "yield" is on my investment portfolio. By that I mean income (dividend & interest) over value (not yield on cost) of your overall investment portfolio (which for me excludes emergency cash and checking account balance). Last year my yield was just below 2%. That sounds reasonable to me because I am still 10 years from our FIRE goal and I am 70/30 stocks/fixed income. I have no particular focus on dividend stocks or high income investments.

We have a standard boglehead portfolio. Looking at divs on total market equities and intermediate bond funds, something near 2% is to be expected.

In the future, I would like to get more income from our portfolio

Why?

 

[aaronc879]

It would take a while to figure it out exactly but it's somewhere between 2.2-2.5%

 

[Fermion]

About 6%.

Junk bonds?

 

[H2ODude]

It would take a while to figure it out exactly but it's somewhere between 2.2-2.5%

Same answer!

 

[phil70]

We have a standard boglehead portfolio. Looking at divs on total market equities and intermediate bond funds, something near 2% is to be expected.



Why?

Long story short, income should mitigate against "sequence of returns risk" in the draw down phase. If for example, I have a 3% withdrawal rate built in to my plan, and have 2% income, that reduces sequence of return problem in comparison to a portfolio that is more dependent on capital gains. Well, that's my thinking anyway.

 

[phil70]

Junk bonds?

Same question here. That's a lot of income!

 

[mrfeh]

Long story short, income should mitigate against "sequence of returns risk" in the draw down phase. If for example, I have a 3% withdrawal rate built in to my plan, and have 2% income, that reduces sequence of return problem in comparison to a portfolio that is more dependent on capital gains. Well, that's my thinking anyway.

Can you explain why you think this? For equities, there is no difference between receiving a dividend of 2% and selling 2% of your shares, other than the fact that by selling shares your taxes are reduced.

For fixed income, you can reach for more yield, but that increases risk.

 

[calmloki]

7.3%

rentals, hard money loans mostly

 

[GrayHare]

We're not including capital gains, right? I've watched this number for many years, and for me it is consistently near 2.5%.

 

[braumeister]

Somewhere between 2 and 3%

 

[leftymd]

2.74% on 70/30 mix..........4 yrs into ER

 

[phil70]

Can you explain why you think this? For equities, there is no difference between receiving a dividend of 2% and selling 2% of your shares, other than the fact that by selling shares your taxes are reduced.

The sequence of returns risk makes the difference. If I have to support myself by selling 3 or 4% of my portfolio every year, I am at greater risk of outliving my funds if the first few years of my retirement are like 2008 or 1929. If I am earning 3% in income, never have to sell a security, no sequence of returns risk. The market value of my income producing investments may decrease as well, but if I don't have to sell then I will do better when the market rebounds.

 

[mrfeh]

The sequence of returns risk makes the difference. If I have to support myself by selling 3 or 4% of my portfolio every year, I am at greater risk of outliving my funds if the first few years of my retirement are like 2008 or 1929. If I am earning 3% in income, never have to sell a security, no sequence of returns risk. The market value of my income producing investments may decrease as well, but if I don't have to sell then I will do better when the market rebounds.

Not selling shares does not eliminate the sequence of returns risk.

What's the difference between owning 100 shares at $50 vs owning 50 shares at $100?

 

[Cobra9777]

Excluding cash, my average yield is 2.9%. This is probably a bit higher than most 60/40 AAs, due to 15% real estate and 5% high-yield bonds. Also, average duration in the bond portfolio is 5.9, due to a fairly large position in LQD. The equity portfolio yields right at 2.0%.

 

[HFWR]

~2.5%

 

[audreyh1]

We're not including capital gains, right? I've watched this number for many years, and for me it is consistently near 2.5%.

I think some folks don't know the difference, which is why I take the reported "yields" with a grain of salt.

 

[Bikerdude]

Excluding capital gains distributions its around 3%.

 

[Midpack]

Wow, I must be doing something wrong if others are getting 6-7.3% in yield alone. Yes I know it's possible but

Last year my total return was only 5.9% (Intl, VGELX & Short Term Bonds hurt overall). Of that 3.1% was appreciation and 2.8% yield (dividends/STCGs).

 

[REWahoo]

Wow, I must be doing something wrong if others are getting 6-7.3% in yield alone.

See post #18 above...

 

[pb4uski]

~2.5%

+1 Dividend and interest income for the year divided by fair value at the beginning of the year. Excludes any CG distributions, capital gains from sales or change in unrealized appreciation.

 

[MichaelB]

Wow, I must be doing something wrong if others are getting 6-7.3% in yield alone.

Last year my total return was only 5.9% (Intl, VGELX & Short Term Bonds hurt overall). Of that 3.1% was appreciation and 2.8% yield (dividends/STCGs).

See post #18 above...

+1

Energy MLPs and leveraged CEFs can yield more than 6%.

 

[NYEXPAT]

7.4% in Dollar's, 13.4% in local currency.

 

[jebmke]

The sequence of returns risk makes the difference. If I have to support myself by selling 3 or 4% of my portfolio every year, I am at greater risk of outliving my funds if the first few years of my retirement are like 2008 or 1929. If I am earning 3% in income, never have to sell a security, no sequence of returns risk. The market value of my income producing investments may decrease as well, but if I don't have to sell then I will do better when the market rebounds.

Spending the dividend is selling the investment. The money doesn't know.