Indexing vs fixed interest rates

[pb4uski]

Yes, all Vanguard. Google is your friend.

[nun]

Quote:

Originally Posted by livinglilies My TIAA-traditional is paying 3% a year. I guess you started it earlier?

Yes I have vintages as early as 1987 when rates were high.


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[Totoro]

I use an approach I picked up in The Intelligent Investor. If safe senior debt (bonds) is more than 2/3rds of what I would expect to earn in junior debt, I'd prefer going for the bond yield. yields in real terms.

Example: 2% inflation. 5% bond = 3% real. 25 P/E = 4% earnings yield + 2% expected growth - 2% inflation = 4%. In that case bonds are quite attractive, or phrased otherwise there is hardly a risk premium for the junior debt.

Currently these numbers are roughly 0% - 1% real for bonds and 3% - 4% for equity. So equities it is. But the gap is closing lately.

That said, I'm roughly 55%/45% equities/bonds. Eventually I want to move towards 75%/25% or so. Not in a rush, waiting for strong drop. It's partly emotional insurance (buy when stuff is low), partly regret avoidance: I know going in now and seeing a 15% drop shortly after would cause me some agony. If things go up another 50% on the other hand I won't feel that as strongly.

[haha]

Quote:

Originally Posted by Lucky-Sperm-Club It is common to hear on this group and others that we should just buy the market or invest in index funds. If a laddered fixed interest rate (CD's, Govt Bonds) investment portfolio could provide a 4-6% safe return would you still be investing in an index investment with the potential of a 10%-30% negative return risk?

If you are referring to the potential loss in the index equity, or even certain bond indices, you are vastly underestimating the potential loss.

Ha

[haha]

Quote:

Originally Posted by Lucky-Sperm-Club I guess my question surrounds my own experience. Over the years I've had a few bets pay off, while others have lagged and even gone to $0. The ones that went to zero really burned me up, because the investments were sound based on book value, but shareholders ended up getting wiped out. However, when I look at my overall portfolio performance, there has been negligible return vs the money put into the investments. Like 4% over 20 years. Most of that gain came from a few good bets and only investing into dividend stocks in the past 10 years. On the other hand I have the temperament and knowledge in rental real estate. Though real estate isn't passive, it isn't a huge time suck either, averaging 2-10 hours per year on average per property. For which I'm rewarded with coupon rates in the teens or higher. As I move to simplify my life in preparation for early retirement, I see more less return and more risk in marketable securities, and I'm looking for ideas on possible solutions. Is there a low risk vehicle out there in marketable securities with a decent steady return, or am I chasing a unicorn.

Why do you care? If you can get the returns you quote, with the small time investment you say, stop looking and be happy. Any experienced investor would say keep doing what you are doing, if in fact it is working as well as you say.

Ha