5% fully secured note vs equities......

[bmcgonig]

I don't see anything cagey myself. I just see it as a "would you take a guaranteed 5% return instead of the stock market over there next 2 yrs" question.

 

[ERD50]

I don't see anything cagey myself. I just see it as a "would you take a guaranteed 5% return instead of the stock market over there next 2 yrs" question.

If that's the case, I'm with haha and OldShooter. A hypothetical like this is meaningless blather. If it is meant to illustrate a point, then come out and say it.

-ERD50

 

[Mulligan]

We got some tough curmudgeons here. New first time poster cant peek above the firing line without ducking already from incoming arrows. He just basically is asking would someone be content with 2/3 of their NW in a secure 5% payment versus equities. If my local utility with A bond rating could offer a 24 month, 5% note, I would be all in including including my emergency money. But, I have a pension and do not need a specific rate of return or any retune for that matter, so I would take the safe 5%.

 

[MichaelB]

There is no free lunch, especially in investing, and the interest rate always reflects risk. There is also an absence of detail in this discussion which is curious.

 

[kcowan]

It is now. With a pe of 42.

Forward PE is half that but still double the historical PE. AT&T is 13 below 13.5 historical but paid only 9.9%. Might be a better choice for OP.

 

[OldShooter]

We got some tough curmudgeons here. New first time poster cant peek above the firing line without ducking already from incoming arrows. He just basically is asking would someone be content with 2/3 of their NW in a secure 5% payment versus equities. If my local utility with A bond rating could offer a 24 month, 5% note, I would be all in including including my emergency money. But, I have a pension and do not need a specific rate of return or any retune for that matter, so I would take the safe 5%.

So do you then not have an asset allocation plan? Just put money wherever the return looks good? I'm not criticizing, just asking.

I think that many of us, maybe most, would not gyrate our asset allocations in the way you are suggesting just because a good fixed income option appeared. In fact, I think the OP's question could be rephrased as "Would you significantly change your asset allocation if such an investment became available?"

 

[Texas Proud]

I do not know why so many people are throwing stuff at the OP...

I think it is a simple question... and I have a simple answer...

NO



For the more complicated answer... it depends... but in almost all cases I can think of I would also say no... however, if it were my 97 YO mother I would get fully out of RE and put all that money and the cash in and leave the equities...

 

[haha]

Many of us here have quite a bit of experience in life and in investing. For example my life experience includes marriage, and this taught me to beware of hypotheticals. Few who are practical enough to amass ER money care to waste 10 seconds on hypotheticals.
When I read a question like 0p's, at the very least there are buried assumptions. So we are being asked to guess what these are. Since this is not possible to do accurately, I pass.

Ha

 

[Mulligan]

So do you then not have an asset allocation plan? Just put money wherever the return looks good? I'm not criticizing, just asking.

I think that many of us, maybe most, would not gyrate our asset allocations in the way you are suggesting just because a good fixed income option appeared. In fact, I think the OP's question could be rephrased as "Would you significantly change your asset allocation if such an investment became available?"

I dont dispute what you are saying here, Oldshooter. And yes, FWIW, I like your rephrased question better than OP's original question. And if his intent was that (not for sure if it was) I think he would be better served by using your rephrased question. But he emphasized already he didnt want to discuss the other factors, so I like the way Texas Proud answered.
I also would agree most probably would be better suited with an asset allocation. At present I want nothing to do with common stocks, so an asset allocation is a non starter for me. If there was a 5 year, 5% CD available (there isnt), I would move all of my money into it today. I am not suggesting that is the best way, but that would be plenty good for me.

 

[OldShooter]

... I am not suggesting that is the best way, but that would be plenty good for me.

"Best" begs the question "Best for what purpose?" So what you are doing is "best." For you. And that is all that matters.

"Best" is probably different for each of us.

 

[Mulligan]

"Best" begs the question "Best for what purpose?" So what you are doing is "best." For you. And that is all that matters.

"Best" is probably different for each of us.

I agree with you again, OS. I am never presumptive to ever assume what I do is best for anyone. I cant even do what is best for me because that would be a 5% CD....So I do what is second best for me....Everyones situation, needs, age, and goals are all different. I could take my investment money and just shove it in my mattress and be fine. Not because I am wealthy, its because I retired over 7 years ago with a pension income that exceeded my spending by over 2k a month and today 7 years later it remains so. If I ever decide to pay off my house, it will be 3k a month. This obviously effects my investing attitude and may make it unique.

 

[bmcgonig]

If that's the case, I'm with haha and OldShooter. A hypothetical like this is meaningless blather. If it is meant to illustrate a point, then come out and say it.

-ERD50

Unlike the other 99% of our discussions which are very meaningful?

 

[bmcgonig]

Many of us here have quite a bit of experience in life and in investing. For example my life experience includes marriage, and this taught me to beware of hypotheticals. Few who are practical enough to amass ER money care to waste 10 seconds on hypotheticals.
When I read a question like 0p's, at the very least there are buried assumptions. So we are being asked to guess what these are. Since this is not possible to do accurately, I pass.

Ha

Bet you wasted more than 10 seconds on that response ☺

 

[ERD50]

Unlike the other 99% of our discussions which are very meaningful?

Ya gotta point there!

But there's a difference between something presented as meaningful, and other discussions just for fun.

Could even be a 'hit and run' troll, hasn't been back to post for ~ 1 day and a half ( or could just be busy, just throwing out the possibility).

-ERD50

 

[haha]

Bet you wasted more than 10 seconds on that response [emoji4][emoji16]☺

True, but bitching is its own reward.

 

[Aerides]

Thus, it kinda boils down to this question (at least for me): Would a prudent investor take all of the money he/she has in equities in this current market and put it in the "no risk" note I've described?

To answer your very specific question, no a prudent investor would not take "all" of their equities and put it in something as described, unless new conditions and accepted logic in this new situation dictated to move away from a proven AA strategy (so, a stretch). Might some move some cash here vs. a CD? Sure, why not. But I don't think anyone would move much out of equities now, other than to rebalance. Diversification and balanced allocations would still prevail.

What you're describing (5% gtd no wd penalty) was iirc similar to a reasonable CD in the early oughts?

 

[dallas27]

Hi. I'm a long time reader of this site, but this is my first post (I just joined).



Assume you have a reasonably balanced portfolio involving equities, real estate and cash. 100 bucks in equities (currently available vanguard funds), 100 bucks in RE and 100 bucks in cash.



Assume you have the chance to participate in a no risk, fully secure note paying 5%. It will be paid off in 18 to 24 months, but it's one phone call check cut the next day liquid. Assume you could put up to 200 bucks in the note if you wanted to.



What is the right move?



Thanks.

No risk? What is that? I don't believe it.

 

[wolf]

Your question makes no sense to me. It is like asking me: "If you had a guaranteed effective anti-gravity belt, would you jump?" The premise is so ridiculous that answering the question is meaningless.

Are you really asking whether people think equities will outperform a 5% yield over the next couple of years? That one I can answer:

No experienced investor IMO would bet on any particular equity yield over such a short period. History leads us to believe that over the long term equities will yield significantly more than 5% but it will be an unpredictable and wild ride.

So if an experienced investor with an asset allocation suitable to his psyche and needs encountered this mythical note, he would attempt to substitute it for some lower-yielding asset in his fixed-income bucket. But it would not occur to him to change his asset allocation because of the note's availability.

Not that it matters to the decision but if the gains are taxable, the equity gain will probably be taxed at a lower rate than the note interest.

+1 Question makes no sense to me too.

 

[ERD50]

No risk? What is that? I don't believe it.

+1 Question makes no sense to me too.

I'm beginning to doubt you'll get an answer. One question and OP hasn't been back in 3 days.

-ERD50