attack my high-yield investing

[vxp036000]

So you basically DRIP dividends, hopefully spread across multiple companies / sectors? I've been thinking about doing the something similar with the excessive cash I have accumulating nothing in a bank. I'd be scared to touch high yeild bonds; it seems a little risky.

Quote:

Originally Posted by Alex in Virginia For almost 4 years, I have invested my IRA funds only in high-yield dividend stocks. When I started, I set a minimum of 6% yield, but in practice I have been operating on a minimum 8 - 8.5% yield for the last 3+ years. Over the last 6 months, I have begun shifting some money into bonds, but again only high yield (10% or better). Thanks.

[NW-Bound]

Quote:

Originally Posted by obgyn65 I would not try it, whatever it is.

Fear is good. A lot of time, fear will protect you.

Greed can be good, but greed quite often get you bankrupt pretty fast.

[brewer12345]

Quote:

Originally Posted by Alex in Virginia Please, Brewer, why must you have such an angry tone with me when I'm just trying to have a constructive conversation, and hopefully learn something? Let's just talk, OK? I asked you to please tell me what you do. You do all that? Talk to competitors and customers of every company you might invest some money in? Build detailed cash flow models? Okay, fine, you do. We still don't know what financial metrics and other fundamentals you use to screen companies to determine whether they meet with your approval. We don't know what ratio thresholds or passing levels you look for to declare a company acceptable. Could you please, please let us in on your approach, given that you see mine as simplistic and clueless? Thanks... Alex in Virginia

Your thread has been hijacked by another troll, so you are getting some of his static as well as your own.

I am not angry or hostile, but my patience is being tried. It is becoming clear that you are some kind of daytrader, which 99.99999% of the people on this board are not. I personally am a dyed in the wool deep value investor and my holding periods are usually measured in years. I think we have little to discuss, given that neither of us is likely to convert the other. Good luck and watch your six: if you make a mistake the losses are all yours.

[photoguy]

Quote:

Originally Posted by vxp036000 I can throw out hard numbers, but you still won't be convinced. I calculated that I'm up 16% from Aug 1, 2011. VTIAX is down 7 % from Aug 1, 2011. How many examples do you want?

Your anecdote is supremely convincing!

On a serious note though, you would need to show that your strategy delivers excess return (or whatever measure you want to optimize) when you account for (1) random variation (including the issue of multiple hypothesis testing/survivorship bias) and (2) proper adjustment of risk levels. If you look on bogleheads or even pick up some finance papers, you can probably find some examples of how to do this.

It's actually not very easy unless you are comfortable with statistical model building. But that is the level of analysis needed given the mountains of evidence against active investing.

[Alan]

Quote:

Originally Posted by vxp036000 When I say high yield, I refer to high yield investment strategy. There is another poster that relies on dividends, but I strictly trade stock. I would also hesitate to use the term day trade, because it generally refers to unconditionally selling all your holdings before the market close. That is not really true for my style of trading. Sorry for the confusion.

Quote:

Originally Posted by vxp036000 I can throw out hard numbers, but you still won't be convinced. I calculated that I'm up 16% from Aug 1, 2011. VTIAX is down 7 % from Aug 1, 2011. How many examples do you want?

Why are you comparing your returns to an international stock index?

[arky]

Quote:

Originally Posted by vxp036000 Well, for most people, active investing is a losers game. No argument there. I wouldn't be surprised if less than 10 % of active investors actually return a profit. The difference is that those 10 % spent substantial time and effort to put together a profitable strategy, after likely having been burned a few times. I can throw out hard numbers, but you still won't be convinced. I calculated that I'm up 16% from Aug 1, 2011. VTIAX is down 7 % from Aug 1, 2011. How many examples do you want?

After a history of 4 or 5 years, you seemed to be convinced you have found "the answer". Maybe you have, maybe you have not. Why try to convince this board ? How will that benefit your total return ? If I had "the answer", I would NOT let the world know about it !

[Gatordoc50]

I'm still looking for the guy/gal who put all his money in treasuries at 6% , lives off of four percent and invests the other 2% in equities. That was my idea about ten years ago and I was laughed away by every advisor I presented the idea to. At the time I wasn't retired somy idea was to put principle in treasuries and earnings in equities. I was about 40 then. Thoughts?

[Gumby]

I hope each and every one of us gets/stays rich by following our own chosen investment style.

Personally, I don't compare my returns to any index or try to beat any particular fund. I know what return my plans require and try to get that return in the easiest and least risky manner possible.

Once you have enough, more won't make you happier.

[JPatrick]

Quote:

Originally Posted by vxp036000 I can throw out hard numbers, but you still won't be convinced. I calculated that I'm up 16% from Aug 1, 2011. VTIAX is down 7 % from Aug 1, 2011. How many examples do you want?

I'm not sure why the international comparison either. We all know that the non US scene was not a pretty one during that period.
Comparing to VTSMX finds a plus 13%.
Not to mention the ease and $$savings by simply holding this one index (not a recommendation by me.) What were the costs of your plan in manhours and dollars?

[vxp036000]

The answer is, it does not benefit my return in the least. Nor have I given away anywhere near enough detail to try to duplicate by approach. My purpose here was to offer an alternative to the strong bias here torward passive investments.

Quote:

Originally Posted by arky After a history of 4 or 5 years, you seemed to be convinced you have found "the answer". Maybe you have, maybe you have not. Why try to convince this board ? How will that benefit your total return ? If I had "the answer", I would NOT let the world know about it !

[Major Tom]

To both vxp036000 and Alex -

I would be interested to see your results after you've been doing this for 10 or 15 years, and see them in comparison to the results from the same period for -

a) a passive portfolio consisting of low-cost index funds 60/35/5 or similar ratio, and
b) some of the more actively-managed portfolios from notable board members here.

Neither of you need to prove yourself to anyone on this board, but that does look as if that is what you're trying to do, both of you.

[vxp036000]

I really have no desire to go through this kind of analysis, especially when my strategy meets my needs and then some. Maybe if I was employed by an investment firm and was trying to sell a product, the statistics would be meaningful.

Quote:

Originally Posted by photoguy Your anecdote is supremely convincing! On a serious note though, you would need to show that your strategy delivers excess return (or whatever measure you want to optimize) when you account for (1) random variation (including the issue of multiple hypothesis testing/survivorship bias) and (2) proper adjustment of risk levels. If you look on bogleheads or even pick up some finance papers, you can probably find some examples of how to do this. It's actually not very easy unless you are comfortable with statistical model building. But that is the level of analysis needed given the mountains of evidence against active investing.

[Ready-4-ER-at-14]

Quote:

Originally Posted by Gatordoc50 I'm still looking for the guy/gal who put all his money in treasuries at 6% , lives off of four percent and invests the other 2% in equities. That was my idea about ten years ago and I was laughed away by every advisor I presented the idea to. At the time I wasn't retired somy idea was to put principle in treasuries and earnings in equities. I was about 40 then. Thoughts?

The thing I read and intended to do was to put the entire principal into treasuries at 6% or so and then buy long term (leaps) call options with the dividends. Then any winnings would have been reinvested into new treasuries. At least in dollar amounts the amount in the account would be positive or increasing every time period. Of course declines in value of dollar or hyper inflation would hurt you.

appended.. amount in the account would be the same or increasing

[JPatrick]

Quote:

Originally Posted by vxp036000 I really have no desire to go through this kind of analysis, especially when my strategy meets my needs and then some. Maybe if I was employed by an investment firm and was trying to sell a product, the statistics would be meaningful.

Hence the title of your thread===
attack my high-yield investing

[Major Tom]

Quote:

Originally Posted by JPatrick Hence the title of your thread=== attack my high-yield investing

This is not his thread. It's Alex In Virginia's.

[vxp036000]

Here is a question for those who are fans of funds. If my portfolio is spread out among a several funds, I can look at the return from each fund at the end of every quarter, year, etc. When I compare the returns, I then adjust my portfolio to put most of my capital in the funds with the highest return. I assume you can re-balance like this without a significant penalty, though I've never looked into it. Do you expect this approach to have a better or worse return than never re-balancing the portfolio?

Another question. Investing in a fund, to my simplistic way of thinking, can hardly beat inflation, at least USA based funds. A fund that tracks the DJI, for example, rises and falls with the market. Which roughly tracks inflation, real inflation for an individula that is, not the bogus number given by fed. So how do you propose having money to live off of and protect your assets against inflation by investing in an ETF?

Quote:

Originally Posted by Major Tom To both vxp036000 and Alex - I would be interested to see your results after you've been doing this for 10 or 15 years, and see them in comparison to the results from the same period for - a) a passive portfolio consisting of low-cost index funds 60/35/5 or similar ratio, and b) some of the more actively-managed portfolios from notable board members here. Neither of you need to prove yourself to anyone on this board, but that does look as if that is what you're trying to do, both of you.

[JPatrick]

Quote:

Originally Posted by Major Tom This is not his thread. It's Alex In Virginia's.

Quite right, though their posts joins them at the hip somewhat IMO.
Alex, please feel free to assume ownership of my previous comment....

[samclem]

Quote:

Originally Posted by Gatordoc50 I'm still looking for the guy/gal who put all his money in treasuries at 6% , lives off of four percent and invests the other 2% in equities. That was my idea about ten years ago and I was laughed away by every advisor I presented the idea to. At the time I wasn't retired somy idea was to put principle in treasuries and earnings in equities. I was about 40 then. Thoughts?

- If started 10 years ago, the buying power of that 4% constant withdrawal would have decreased by about 30% as of 2012. And inflation has been very mild in historical terms, the investor might well have done far worse. Inflation is a major risk to this approach.
- The plan increases the AA devoted to equities in this retiree's portfolio over time, rather than the conventional approach of reducing equity exposure. Something worth considering--do folks want more portfolio volatility as they age?
- Obviously, it would be tough to find 6% treasuries today, so it's not an approach that is practical to start now.
- Even after 10 years, the investor would have a very small % devoted to equities (20%, plus any growth int he equities), and during that time would have missed the historically higher expected return that equities provide compared to treasuries. It's tough to make up for this "lost time" later. At 40 years old, and knowing that equity-like returns would be needed to fund many years of retirement (else why invest in them at all?), it seems suboptimum to deliberately start at 0% equities. It would be better to invest 1/3rd less in treasuries and meet living expenses by pocketing the full 6% return (of the smaller Treasury pile) and put the 33% difference in equities from the start.

[photoguy]

Quote:

Originally Posted by vxp036000 I really have no desire to go through this kind of analysis, especially when my strategy meets my needs and then some. Maybe if I was employed by an investment firm and was trying to sell a product, the statistics would be meaningful.

That's fine if you don't want to do any analysis and just want to do your own thing, but your claim below is unsupported.

Quote:

Originally Posted by vxp036000 I think it would be quite easy to show that my active investment strategy is roughly the same risk, and higher yield than any passive investment.

[Gatordoc50]

Quote:

Originally Posted by Ready-4-ER-at-14 The thing I read and intended to do was to put the entire principal into treasuries at 6% or so and then buy long term (leaps) call options with the dividends. Then any winnings would have been reinvested into new treasuries. At least in dollar amounts the amount in the account would be positive or increasing every time period. Of course declines in value of dollar or hyper inflation would hurt you. appended.. amount in the account would be the same or increasing

I think that is a sound strategy. Here is my hesitation with equities. The markets were intended to provide capital for businesses. But a very small amount of total investment is used for that purpose. The remainder just basically pushes up prices. The S and P returns 16% last year with 2% dividends? I'm starting to believe that the secondary markets are like bubble gum. The gum is the amount of capital chewed by companies and the bubble increases and decreases according to the money supply.