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Old 09-10-2020, 09:39 AM   #101
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Thank you, Kevink for the Humbledollar link. Am really enjoying the articles and comments.
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Old 09-10-2020, 09:59 AM   #102
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OK - all good stuff.

BUT ... I know I am treading on hallowed ground, here. Solid stocks - ones that decrease during market resets at about the same rate as recent bond resets during those market drop have dividends 3-5X the bonds - with somewhat more volatility - and, discounting the upside volatility.

Just bought ATT at 29.15 ... at that it pays more than 7% ... not a high flyer and just using it as a specific case.

Why, at this price, and given my ability to withstand some market flux, is this so much worse than bonds?
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Old 09-10-2020, 10:43 AM   #103
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Why, at this price, and given my ability to withstand some market flux, is this so much worse than bonds?
Because total return is all that matters. And when it comes to equities, significant depreciation is a very real possibility.
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Old 09-10-2020, 10:46 AM   #104
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But, mrfeh, that is my point - just using my one example, does the data on my one example support the broad assessment? Total return over three years on T vs same on pick-your-maturity bond?
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Old 09-10-2020, 10:51 AM   #105
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But, mrfeh, that is my point - just using my one example, does the data on my one example support the broad assessment? Total return over three years on T vs same on pick-your-maturity bond?
There's no point comparing ATT to a bond fund. Apples and oranges.

And obviously, what has happened the last X years is no indication of what will happen in the future.

GE was once a safe source of dividends, right?

https://www.morningstar.com/stocks/xnys/ge/quote
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Old 09-10-2020, 10:55 AM   #106
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Hmmm ...

I am trying to compare the way very boring dividend stocks are behaving vs bonds - now, versus 30 years ago - I recognize the topic is inflammatory, but just stating "Apples and oranges" doesn't get me to where it makes sense.
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Old 09-10-2020, 10:57 AM   #107
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Hmmm ...

I am trying to compare the way very boring dividend stocks are behaving vs bonds - now, versus 30 years ago - I recognize the topic is inflammatory, but just stating "Apples and oranges" doesn't get me to where it makes sense.
Run a search over on bogleheads.com
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Old 09-10-2020, 11:02 AM   #108
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Because total return is all that matters. And when it comes to equities, significant depreciation is a very real possibility.
Not really a concern to a long-term investor. The steady rise in equities' value over 100+ years is about as sure a thing as there is in investing. There is no doubt that over the long term equities are the total return winner.

Short term and individual stocks? Not so much. That is why we diversify our stock ownership, buy, and hold. It is also why there are many situations where SORR dictates a portfolio that is not 100% equities.
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Old 09-10-2020, 11:03 AM   #109
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Did that awhile back - got the "apples and oranges" answer - I'll keep looking for statistical scenarios of dull dividend stocks vs bonds.
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Old 09-10-2020, 11:08 AM   #110
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OK - all good stuff.

BUT ... I know I am treading on hallowed ground, here. Solid stocks - ones that decrease during market resets at about the same rate as recent bond resets during those market drop have dividends 3-5X the bonds - with somewhat more volatility - and, discounting the upside volatility.

Just bought ATT at 29.15 ... at that it pays more than 7% ... not a high flyer and just using it as a specific case.

Why, at this price, and given my ability to withstand some market flux, is this so much worse than bonds?
But AT&T might be at $14.08 in 10 years.... whereas if you buy a 10-year bond there is a negligible chance that it will be worth 50% of what you paid for it in 10 years.

GE has gone from $15 10 years ago to $6 today... so it is possible.
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Old 09-10-2020, 11:12 AM   #111
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pb4uski,

Sure, but I would need first to pick stocks that DON'T exhibit that kind of behavior, and then follow that stock to ensure nothing weird is happening. Now, I know ALL stocks could do that sort of thing, but there are many that never have been that volatile.

I'm just weirded out by such low bond returns - trying to make sure I am not missing something.
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Old 09-10-2020, 11:20 AM   #112
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pb4uski,

Sure, but I would need first to pick stocks that DON'T exhibit that kind of behavior, and then follow that stock to ensure nothing weird is happening. Now, I know ALL stocks could do that sort of thing, but there are many that never have been that volatile.

I'm just weirded out by such low bond returns - trying to make sure I am not missing something.
Nobody has a crystal ball. Not me, not you, not the "experts".

Yes, the terribly low yields stink, but that's not an excuse to chase yield, especially using equities.
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Old 09-10-2020, 11:23 AM   #113
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Hmmm ... but don't we chase yield when buying bonds? With CDs?

Again, this may sound irritating to some, but I still wonder why not look for higher "yield" in this manner?
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Old 09-10-2020, 11:25 AM   #114
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Hmmm ... but don't we chase yield when buying bonds? With CDs?

Again, this may sound irritating to some, but I still wonder why not look for higher "yield" in this manner?
CDs and bonds are a form of fixed income. Equities are not.
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Old 09-10-2020, 11:30 AM   #115
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pb4uski,

I'm just weirded out by such low bond returns - trying to make sure I am not missing something.
I also struggle with Bonds and future total return. As I understand it, the middle ground is buying Preferred Stocks. The bonds get paid first, but the preferreds get a higher yield due to stock risk, but get paid dividend in full if the common shares get any. You could buy Wells Fargo, and suffer a large stock risk, but their preferred shares are called at issue typically $25/shr. The yield is well over 6%. Bonds issued are much lower yield as well as the dividend on common shares.

Buying iShares Preferred the dividend rate is high, but the YTD total return is a -4.6%, but buying individual shares of preferreds you can do better on higher rated issues, kind of like bonds and bond funds. Same point, I am wierded out on Preferred funds lower total returns. AND I know I am missing something.....
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Old 09-10-2020, 11:32 AM   #116
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I suggest that none of us have the ability to determine what seemingly safe blue-chip stocks will fall or fail in the next 10 years.

GM.... 6.58% lower, IBM... 0.71% lower, Kodak... 76.72% lower

You get the point.
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Old 09-10-2020, 11:37 AM   #117
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Hmmm ... but don't we chase yield when buying bonds? With CDs?...
Your misinterpreting the term chasing yield.... chasing yield means assuming more credit and price risk in exchange for a higher return.

Since CDs are FDIC insured, it is impossible to chase yield in that sense since the credirisk of FDIC insured bonds are all the same... if you find a higher yielding CD it is not riskier than any other CD.

You can chase yield with bonds in accepting lower credit quality bonds or longer duration bonds for higher yield, in which case you are taking on more credit risk or more interest rate risk.
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Old 09-10-2020, 11:42 AM   #118
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I would think this largely applies to muni bond funds as well. If Vanguard today has a fund holding a bunch of bonds paying 5% it is more valuable given rates a current bond would go for.

Remember that the "total" return is based on "interest" return and "capital" return. A fund holding a bunch of 5% bonds will give you a good interest return but the capital return will vary.

The capital return will be based on market conditions. For treasuries, a bear market will give you good capital return while a bull market will give you poor capital return. This is based on flight to quality and flight from quality as explained in the following link for treasuries:

https://www.thebalance.com/what-is-t...quality-416873

If you understand why bond prices and interest rates move in opposite direction as I explained previously and you understand the flight to quality, you should have a better understanding on the bond market which I find to be more predicable than the stock market. For example, it is anybody's guess whether the stock market will go up or down tomorrow in the short term. However, the interest rates are likely to be low in the short term.

In the long term, equities always outperform bonds. Investors who have ONLY a long term strategy should remain in equities. For those investors who have both a long term strategy and a short term strategy may have a different strategy on how they allocate their portfolio such as a 60/40 portfolio. The 60% provides long term appreciation in higher risk equities while the 40% provides some short term liquidity in lower risk bonds. Bonds also offset the high risk of higher risk equities.

Everyone has a different strategy, financial goals, risk tolerances and time horizons. Most people understand equities. However, less people understand bonds. Some people buy a total bond index fund and then call it a day. There is nothing wrong with that....but they are missing an opportunity on getting a better return on their bonds because investors can predict whether the interests will be going up, down or hold in comparison with the stock market which tend to be unpredictable.
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Old 09-10-2020, 11:45 AM   #119
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.... but I still wonder why not look for higher "yield" in this manner?
Because of the risk to principal. Absent a credit default, which is rare, a bond holder will get back their $1,000 of principal plus interest.

OTOH, the blue-chip stock holder will get their dividends as long as the company is able to pay, but may not get their entire investment back.

Take a GE investor of 10 years ago who bought a 10 year bond. GM hasn't defaulted on its bonds so the bond holder got their $1,000 back plus interest. Meanwhile, the stockholder has received dividends for the 10 years but will only get $934 of their $1,000 back since the stock price has declined 6.6% over the last 10 years.

And you don't what to know what Kodak investor got back.
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Old 09-10-2020, 12:01 PM   #120
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Did that awhile back - got the "apples and oranges" answer - I'll keep looking for statistical scenarios of dull dividend stocks vs bonds.
There are a handful of large companies I'm familiar with that pay|paid decent dividends. Pointing out one loser again serves no purpose.

You can look at any these dividend payers in the past five years and find a period where things looked great. But you also would have seen for some:
1) Dividend cut
2) Dividend frozen
3) Dividend eliminated

In addition the NAV could have fallen dramatically, and not recovered.

Instead of individuals, though, consider sacrificing some yield (and some risk) and consider a dividend ETF (SCHD, SPYD, PGX, etc.). Then buy 100 shares and compare the total performance result you get with S&P500. Are you happy with less performance, but improved income?

Another idea is to look for growth AND income. For example, telecom companies like T aren't growing, and stock value is slowly dropping. But health companies like ABBV are growing (erratic I admit) and pay out income to you.

In the end it is your money to experiment with.
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