Earn 2% kind of safely?

[street]

I told you it was a stupid question. lol My intention of what I said was 2% clear after tax/inflation.

 

[Fedup]

I recall having an emerging market fund back then. It's OK with me if you don't check out what emerging market funds did in 2008.

I don't understand this post. I thought you wrote in your OP, not to lose principal. So it's ok to lose money then.

 

[NW-Bound]

From mid 2008 to March 2009, Wellesley lost 20%. That's still a lot better than other balanced funds. For example, Dodge and Cox Balanced lost 50% because it was heavy in financials.

 

[Fedup]

From mid 2008 to March 2009, Wellesley lost 20%. That's still a lot better than other balanced funds. For example, Dodge and Cox Balanced lost 50% because it was heavy in financials.

I thought Wellington lost 20% for 2008. And Wellesley lost 9-10% for 2008. I researched these funds on Morningstar before I considered them. They also have to have 4-5 stars with Gold ratings. I especially pay attention to year 2008, that's the year that distinguishes between men and boys in the investing world. It's easy to make money in a good year. Not so easy in a bad year.

 

[NW-Bound]

We are talking two different time periods. I like to look at performance from top to bottom, instead of per calendar year. When people remember that they had $1M at the highest point, and now they have $700K or $600K as the market bottoms out, that's what they know.

Yes, these funds did very well over this difficult period, when the S&P got down to 44c on the dollar from Nov 2007 to Mar 2009. Yes, a $1M in the S&P got down to as low as $440K. That hurt!

On the other hand, if one had $1M in Wellesley in 2007, he still had $800K at the market bottom in 2009. Far better than $440K in the S&P, or $500K or $600K in some other funds.


PS. I am not trying to scare anybody off the market. I like stocks despite the volatility. Many can't handle it.

 

[Lakewood90712]

I think that 5% safe investment that you can get back within a day with a phone call on the other thread is the best....


Only if he would tell us what it is!!!!

I did a little research on that 5% safe return thread. Found out the guy runs an un-registered fund that uses a proprietary algorithm to buy mostly winning Lottery tickets.

Seems reasonable. I'm in.

 

[Texas Proud]

I did a little research on that 5% safe return thread. Found out the guy runs an un-registered fund that uses a proprietary algorithm to buy mostly winning Lottery tickets.

Seems reasonable. I'm in.

ROFLMAO!!


And how did you find out about that

I guess he could tell his trolling here was going to be unproductive with the response he got....

 

[redduck]

...Safety (as in let's not try to lose principal) is a concern. Any ideas?

I recall having an emerging market fund back then. It's OK with me if you don't check out what emerging market funds did in 2008.

I don't understand this post. I thought you wrote in your OP, not to lose principal. So it's ok to lose money then.

I can see where my post was confusing. I was just reminiscing about 2008 and what a disaster it was. In any case, I don't think getting 2% without a risk of losing principal is realistic. This guy was just wanting to come close to that (and probably not wanting to tie the money up for a huge amount of years).

 

[Texas Proud]

I can see where my post was confusing. I was just reminiscing about 2008 and what a disaster it was. In any case, I don't think getting 2% without a risk of losing principal is realistic. This guy was just wanting to come close to that (and probably not wanting to tie the money up for a huge amount of years).

But going into stock is not even an option if you do not want 'risk'....

As I mentioned, you can get at least 5% with preferred shares and possibly bonds that are very high rated... with the preferred the prices do not change that much if you pick correctly...

 

[Coolius]

But going into stock is not even an option if you do not want 'risk'....

As I mentioned, you can get at least 5% with preferred shares and possibly bonds that are very high rated... with the preferred the prices do not change that much if you pick correctly...

Texas, while what you wrote is correct, the higher yield potential does have a few associated risks.

Those are the risk of a call - the issuing company redeems the preferred shares at par ( usually $25 ) plus about 30 days accrued interest. So anyone buying a preferred above par could well end up losing if a call occurs at the wrong time.

The other risk is that of interest rate - as rates go up, other alternatives ( even other preferreds ) become more attractive, so a preferred stock which is akin to a bond, tends to decline.

And finally, there is always risk of the issuing company going BK, where all shareholders will take a bath, if not lose everything completely.

Oh, and a little known risk called Waldenization.........not known to those who do not invest in Preferred Securities.


So, unfortunately, there are still risks aplenty in the Preferred Stock Sector.

 

[Texas Proud]

Texas, while what you wrote is correct, the higher yield potential does have a few associated risks.

Those are the risk of a call - the issuing company redeems the preferred shares at par ( usually $25 ) plus about 30 days accrued interest. So anyone buying a preferred above par could well end up losing if a call occurs at the wrong time.

The other risk is that of interest rate - as rates go up, other alternatives ( even other preferreds ) become more attractive, so a preferred stock which is akin to a bond, tends to decline.

And finally, there is always risk of the issuing company going BK, where all shareholders will take a bath, if not lose everything completely.

Oh, and a little known risk called Waldenization.........not known to those who do not invest in Preferred Securities.


So, unfortunately, there are still risks aplenty in the Preferred Stock Sector.

I agree with what you say.... but which has more risk.... a diversified fund that has 40% to 60% stock or a group of below call or close to call or even not callable yet bonds and preferred stocks that yield 4% to 5%

And you can get that 4% to 5% with very high ratings, not like what I am doing replacing my HY bond fund...

 

[redduck]

Texas Proud, thanks for the suggestion. And, Coolius, thanks for keeping on eye on Texas Proud.
You guys have become mavens regarding the good, the bad and the in between (Mulligan's Preferred stocks thread). I wish I had started picking up on this when you guys did. But, I didn't.

While Preferreds sound appealing and interesting (it sounds like hunting to find what you're looking for), I just don't know enough (like zero) about Preferreds to recommend them. But, they've seemed like a good idea to me for a very long time. Instead, I may have wandered down the dividend stock path--which also involves some sort of hunting, but I don't think it's quite as sophisticated as what you guys do.

 

[Coolius]

Redduck,

The area of Preferred stock is not that difficult. Preferreds combine characteristics of both stocks & bonds, and like all other securities, have advantages & disadvantages.

You can easily check out various websites on the internet to learn about them. Mulligan & I also post on the Income Investing thread at the Silicon Investor website.

And the Preferred Stock thread is always there for you to browse, ask questions, brainstorm, etc.

You might well find Preferred Stock ( & baby bonds ) suitable for a portion of your portfolio.

 

[Coolius]

I agree with what you say.... but which has more risk.... a diversified fund that has 40% to 60% stock or a group of below call or close to call or even not callable yet bonds and preferred stocks that yield 4% to 5%

And you can get that 4% to 5% with very high ratings, not like what I am doing replacing my HY bond fund...

For us ER types, no question that Preferreds/Bonds provide a greater degree of SWAN. Income stability but little growth potential, and a higher position on the stakeholder's totem pole.

The problem at this time is the high valuation of the entire Preferred sector, bargains are difficult to find.

Look at WFC-L, for example. I was recommending it a few months back at $1,200. It is now 8% higher. Definitely not a buy at this point, IMO.

 

[Fedup]

It's a long thread, but when I have time I will get over there.

 

[NW-Bound]

I spent a bit of time following the Preferred Stock Thread, and looked a bit into this. I gave it up when seeing that these stocks were so thinly traded, and it took some devotion to follow this market segment.


So, I went back to what I have been doing all these years: watching the common stocks in sectors that I have invested in for many years, and doing options to pick up a few percent here and there. There are many ways one can safely pick up a bit of extra investment incomes, and I can only do so much.

 

[Fedup]

That's what I do too. I've been profitable with international stock options this week.

 

[RobLJ]

Just curious if anyone knows of a few Preferred Stock mutual funds; I've considered it for some of the current cash/bond allocation. My cash allocation is too high, but I don't want to buy stock or most bonds right now, although I probably need to boost foreign bonds.
A concern is that I think both preferreds and dividend stocks are richly valued.

 

[Montecfo]

Just curious if anyone knows of a few Preferred Stock mutual funds; I've considered it for some of the current cash/bond allocation. My cash allocation is too high, but I don't want to buy stock or most bonds right now, although I probably need to boost foreign bonds.
A concern is that I think both preferreds and dividend stocks are richly valued.

PFD is one I have liked. I do not like it as much in a rising rate environment but you may.

 

[Texas Proud]

Just curious if anyone knows of a few Preferred Stock mutual funds; I've considered it for some of the current cash/bond allocation. My cash allocation is too high, but I don't want to buy stock or most bonds right now, although I probably need to boost foreign bonds.
A concern is that I think both preferreds and dividend stocks are richly valued.

I would be careful with a fund.... it will act like a bond fund and lose value with rising rates... they also will be investing in lower rated companies... so not as stable....

The income return might be better though...

 

[Koolau]

The following possibilities have the risk of the underlying insurance company or whatever "management" is associated with it:

I have not checked on SPDA (Single Premium Deferred Annuities) lately but they often carry better interest than banks - if they are still available (I have a couple still earning almost 5% - from back in the day).

Does he have access to a a "Guaranteed Income Fund" aka "Stable Value Fund"? The one in my 401(k) is paying better than 2% now. In theory, there's some risk of the underlying contracts, but that's supposed to even out. In any case, the rate is not guaranteed, but the rates SHOULD be heading up along with everything else (assuming the slow increase in Fed rates, etc.) YMMV