Author Topic: Advice for yield investment  (Read 5931 times)

bako_frugal

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Advice for yield investment
« on: August 01, 2014, 01:24:06 PM »
I have $60k I am looking to allocate by the end of the year that is currently in cash.

Any recommendation for investments with a minimum of 7-8% yield?
These are funds I have allocated for a high yield investment, but nothing is coming across as all that appealing at the moment.

Ideas?

milesdividendmd

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Re: Advice for yield investment
« Reply #1 on: August 01, 2014, 02:15:58 PM »
Anything with a yield of 7 to 8% in this market will likely have either severe credit risk, or concentrated equity risk associated with it.

The main question is why focus on yield? There is no evidence that high-yielding investments outperform The broad market that cannot be explained by exposure to other factors such as value.

Are you thinking junk bonds?

bako_frugal

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Re: Advice for yield investment
« Reply #2 on: August 01, 2014, 02:44:06 PM »
I have never tried junk bonds.  Do you have any experience with them?

I know the agrument for growth over yield in the long run.  But for right now, I was wanting to generate a portfolio that also includes an income stream.  My remaining cash at ~7.5% yield will let me hit my target.
This is under 10% of my protfolio that I am playing with.  So I am okay with the risk for a sliver of high yield.

But I am not finding anything stock-wise that inclines me to buy.

One of my accounts offers restricted reverse convertable bond notes, but I don't have experience with those either.  Anyone had good or bad luck with exclusive bond offerings?

Scandium

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Re: Advice for yield investment
« Reply #3 on: August 01, 2014, 03:31:31 PM »
Argentinian bonds might have a decent yield soon..

vivophoenix

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Re: Advice for yield investment
« Reply #4 on: August 01, 2014, 03:33:36 PM »
perhaps a series of small personal loans, lending club?

brewer12345

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Re: Advice for yield investment
« Reply #5 on: August 01, 2014, 04:16:12 PM »
I would trawl the closed end fund world.  Start with the screener at www.cefconnect.com

That said, 7 to 8% yield today will not be low risk.

bako_frugal

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Re: Advice for yield investment
« Reply #6 on: August 01, 2014, 06:14:45 PM »
Makes me feel old to say, don't you remember the days when +15% yield was high risk? 

I'll look at some of the closed end funds.  Not too sure about lending clubs, that feels to social for me.
Thanks for the comment.

brewer12345

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Re: Advice for yield investment
« Reply #7 on: August 01, 2014, 08:20:16 PM »
Makes me feel old to say, don't you remember the days when +15% yield was high risk? 

I'll look at some of the closed end funds.  Not too sure about lending clubs, that feels to social for me.
Thanks for the comment.

Times change, the world changes.  Give it time and the high yield market will blow up again and double digit yields from acceptable high yield credits will be available once again.

milesdividendmd

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Advice for yield investment
« Reply #8 on: August 01, 2014, 08:40:24 PM »
I have never tried junk bonds.  Do you have any experience with them?

I know the agrument for growth over yield in the long run.  But for right now, I was wanting to generate a portfolio that also includes an income stream.  My remaining cash at ~7.5% yield will let me hit my target.
This is under 10% of my protfolio that I am playing with.  So I am okay with the risk for a sliver of high yield.

But I am not finding anything stock-wise that inclines me to buy.

One of my accounts offers restricted reverse convertable bond notes, but I don't have experience with those either.  Anyone had good or bad luck with exclusive bond offerings?

I've never invested in junk bonds (high-yield bonds) because they give you equity like risk, with less than a Equity like rewards (unless the spread is very wide ((which currently it is not.))

In general looking for yield with Stocks is not a bad idea, because it gives you exposure to the value factor. As it stands right now, however, dividend stocks are completely overvalued relative to their historical pricing.

If you want to stretch for income, The last place I would look right now is at a dividend paying stock.

Better to invest in a small cap value fund, or a momentum fund if you want to chase a  7.5% income stream. Just sell 7.5% of it every year and you've done the exact same thing, only actually you are exposing yourself more to value and it is more tax efficient.

But if you want a high-yielding ETF, perhaps you should buy REM?
« Last Edit: August 01, 2014, 08:43:26 PM by milesdividendmd »

sdp

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Re: Advice for yield investment
« Reply #9 on: August 01, 2014, 10:28:06 PM »
are there any REITs that might get you close to your goals?

AssetGrinder

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Re: Advice for yield investment
« Reply #10 on: August 01, 2014, 11:55:42 PM »
To get 7-8% yield you are gonna have to roll the dice a bit. at 6% i would recommend a couple things but at 7+ that is a tough task without really putting your money out on the line.

If I had to make one crazy risky bet to get u there.
Buy 60k of Apple stock and write monthly covered calls 10% out of the money and keep writing until it hits.

The Falcon

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Re: Advice for yield investment
« Reply #11 on: August 02, 2014, 06:07:16 PM »
Does foreign currency exposure worry you? There are places with a higher typical pay out ratio than the US. Not sure if you can access Vanguard Australian High Yield ETF from the states, it pays around 7.5% grossed up.

There are obviously some exposures to consider of course.

pom

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Re: Advice for yield investment
« Reply #12 on: August 05, 2014, 01:30:37 AM »
Does foreign currency exposure worry you?

I was thinking the same, there are some higher yield shares around the world. Usually telecom and energy companies have decent yield. One issue though is that it seems to me that European companies are quicker to cut dividends if things get rough than American companies.

Scandium

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Re: Advice for yield investment
« Reply #13 on: August 05, 2014, 10:57:02 AM »
Does foreign currency exposure worry you?

I was thinking the same, there are some higher yield shares around the world. Usually telecom and energy companies have decent yield. One issue though is that it seems to me that European companies are quicker to cut dividends if things get rough than American companies.
At which point all the yield-seekers sell so now you can either sell at a loss, or sit an hope they reinstate their dividend. This always seems like a huge PIA with that strategy.

bako_frugal

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Re: Advice for yield investment
« Reply #14 on: August 05, 2014, 02:59:44 PM »
I have never tried junk bonds.  Do you have any experience with them?

I know the agrument for growth over yield in the long run.  But for right now, I was wanting to generate a portfolio that also includes an income stream.  My remaining cash at ~7.5% yield will let me hit my target.
This is under 10% of my protfolio that I am playing with.  So I am okay with the risk for a sliver of high yield.

But I am not finding anything stock-wise that inclines me to buy.

One of my accounts offers restricted reverse convertable bond notes, but I don't have experience with those either.  Anyone had good or bad luck with exclusive bond offerings?

If you want to stretch for income, The last place I would look right now is at a dividend paying stock.

Better to invest in a small cap value fund, or a momentum fund if you want to chase a  7.5% income stream. Just sell 7.5% of it every year and you've done the exact same thing, only actually you are exposing yourself more to value and it is more tax efficient.

But if you want a high-yielding ETF, perhaps you should buy REM?


In reference to the income stream.  Yes I fully understand that selling off from a small cap value fund can equal a greater revenue stream.  But I also understand my own psychological response to money.  I am one of those people who are more secure with income generated by dividends than selling off assets.  Emotions are not rational, but if you know how you respond to money, it makes more sense to work with your emotions than to attempt to work against them.  Im still in my wealth building phase, so my plans are still very fluid.  I would like to get to $35k dividends per year.  Right now I am at ~$20k from ~$600k.  Mostly mid-cap & industrial stocks (NC, CE, AA, ETR, DE, X, WM, ADM, etc).  I dont really like buying funds, I just buy across the stock market.  2-4 new stocks per year, & sell off any previous dogs.  10+ years and I have a pretty wide portfolio.

Thank you for the comments.  Thinking about it and getting input I think I'll table the 7-8% target and stick with mid-cap stocks in the 4-6% range.   It just means I needs to keep on at it a little longer.

milesdividendmd

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Re: Advice for yield investment
« Reply #15 on: August 05, 2014, 04:36:03 PM »
Fair enough. I too have my own behavioral blind spots. It's always better to aknowledge them and adjust your strategy than to pretend they don't exist.

Given your stated goal perhaps a combination of domestic and international REITS would be reasonable?

I just worry that dividend stocks, while historically a pretty smart value play are likely to be very disappointing for the next 10 years or so.

bako_frugal

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Re: Advice for yield investment
« Reply #16 on: August 05, 2014, 06:01:43 PM »
Does foreign currency exposure worry you?

I was thinking the same, there are some higher yield shares around the world. Usually telecom and energy companies have decent yield. One issue though is that it seems to me that European companies are quicker to cut dividends if things get rough than American companies.
At which point all the yield-seekers sell so now you can either sell at a loss, or sit an hope they reinstate their dividend. This always seems like a huge PIA with that strategy.

So the one thing I have realized starting to read these forums is that I have no idea about all the acronyms that people use.
What is PIA?

Also as a very random side question when people are referring to their spouse as DW / DH, what is the D?

daverobev

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Re: Advice for yield investment
« Reply #17 on: August 05, 2014, 08:10:53 PM »
Does foreign currency exposure worry you?

I was thinking the same, there are some higher yield shares around the world. Usually telecom and energy companies have decent yield. One issue though is that it seems to me that European companies are quicker to cut dividends if things get rough than American companies.
At which point all the yield-seekers sell so now you can either sell at a loss, or sit an hope they reinstate their dividend. This always seems like a huge PIA with that strategy.

So the one thing I have realized starting to read these forums is that I have no idea about all the acronyms that people use.
What is PIA?

Also as a very random side question when people are referring to their spouse as DW / DH, what is the D?

PITA, at a guess. Pain in (the) arse, or ass (which is an animal, but as you prefer!)

Dear

YW!

bako_frugal

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Re: Advice for yield investment
« Reply #18 on: August 06, 2014, 04:55:38 PM »
Thank you for the translation.  I was trying to think of finance terms for PIA, my favorite from wiki was "Purified isophthalic acid". Hmm... probably not.

I think I had a mental block against DH / DW being "dear" since I just can't think of my SO as a "dear". 

pom

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Re: Advice for yield investment
« Reply #19 on: August 07, 2014, 03:18:23 AM »
I actually use PITA, I can't remember which book that was from but it was from an investment book from 20+ years ago. The author was ranking investments not only from the traditionnal expected return, volatility, liquidity ... but also by their PITA factor.

Collecting dividends from shares is low PITA
Owning rental properties in a rough neighborhood of Jakarta is sky-high PITA

TomTX

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Re: Advice for yield investment
« Reply #20 on: August 07, 2014, 05:42:56 AM »
Expecting 7-8% yield in today's environment (in US $) is a fool's errand.

Mr Mark

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Re: Advice for yield investment
« Reply #21 on: August 07, 2014, 11:16:58 AM »
Expecting 7-8% yield in today's environment (in US $) is a fool's errand.

What? You mean i can't get 7% passive return in US$ with no risk....? sigh.

;-)

Will have to go back to harvesting unicorn horns I guess...