It looks like you're new here. If you want to get involved, click one of these buttons!
Shostakovich said:”See Ed Studzinski's commentary this month.”
”See Ed Studzinski's commentary this month.”
Interesting commentary. Ed seems of the opinion we’re facing hyper-inflation.
© 2015 Mutual Fund Observer. All rights reserved.
But, yes, as I think Shostakovich observes, Ed recommends staying very short on your fixed income duration - out to only a year or two. He points to 2 funds he likes that do that. Since “dividends” usually refers to stocks, not bonds, I gather that ron is contemplating some type of fund that invests in dividend paying companies. Hmmm … Tough call because these types of funds have run up a lot (ie PRFDX) this year and I never like buying high. But, what do I know?
A fund like like RPSIX will provide maybe 15-25% exposure to stocks while still playing mainly in the fixed income area. Not a bad choice - however, the bond duration is likely longer than Ed recommends. And there are combo funds like ALAAX that carry a slightly higher equity content - while still focusing on the income producing type stocks.
Real estate is sometimes included in that area, but it’s had a great run up this year. I’d be loath to buy a REIT at these levels. I’m thinking a utilities fund might be a better value if seeking dividend paying companies.
Full disclosure: I’m using a lot of GNMA funds in my fixed income portion. They’re on the relatively shorter end of the duration curve presently (for the type of fund) - only out 3-5 years, but still much farther out than Ed deems prudent. I like that they’re of a higher quality credit than corporate bonds and I don’t mind loosing a bit of $$ on them as long as the equity / risk-asset areas keep climbing.
No easy answers.
Here’s 1 out of many articles on using dividend paying stocks or funds. I haven’t had time to read it closely, but it appears something ron might find of interest - if only to encourage him to do more research on the subject. Here
Here’s your original question: Large Cash vs bonds or dividends? Nothing wrong with cash for older investors. It won’t keep up with inflation, but certainly helps sleep better. There’s been quite a bit of discussion here over whether the equity / commodity markets are valued rationally.
@Shostakovich had it correct when he referenced Ed’s mention of short duration bonds.
Here’s a clip of what Ed said re cash:
“So, back to asset allocation – obviously have enough cash reserves to fund at least two years of living expenses, in insured certificates of deposit. There is a market to be shopped there in smaller banks and credit unions, with nine to twelve month certificate yields running between 35 and 45 basis points. In terms of currencies, if your liabilities are dollar-denominated, your investments also should be. The exception is using international funds that do not hedge back their foreign currency exposure to dollars. In terms of bonds, favor those with maturities of less than a year, generally using some of the ultra-short bond funds available from Vanguard or Northern Funds.“
@bee Good point on oil. It’s taught me the value of patience and sticking to your guns, as most of us abandoned our oil positions way back and watched its price fall into negative territory (early 2020). Yet - here it is at near $83. I remember T Boon Pickins predicting this price rise a few years ago. T. Boone had it right. Unfortunately he died in 2019.
I have been using DIVO for sometime now and I am pleased so far. I also hold a position in CDC but everyone has different needs, wants and portfolio's.