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I have a few questions for those of you following this strategy.
First, do you guys own bonds or gold or are you all in on just cash and dividend stocks?
Also, do you ever sell positions or do you follow the concept of buy and hold forever?
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I am not a fan of bonds. For anyone of the opinion that equity valuations are generally overstretched (I think so), they should be equally concerned about bonds. The bull market in bonds started in the early 1980s, and we are currently experiencing bond valuations that are unprecedented in the history of global bond markets. Reversion to mean will be a bloodbath if it ever occurs.
I share Warren Buffett's opinion on Gold. It is not an investment.
I also share his general view of buy and hold being the way to make and keep money. Pick solid dividend growth companies with decades of dividend raises under their belts, safe balance sheets, and buy them at a fair or better value, and you can get rich slowly while the magic of compounding does its work. It takes a certain mindset, and willingness to be patient, but anyone who stayed invested in a diversified basket of Dividend Kings and Dividend Aristocrats for the past 20-30 years is probably pretty pleased with their portfolio today.
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(02-04-2020, 11:23 AM)Otter Wrote: I am not a fan of bonds. For anyone of the opinion that equity valuations are generally overstretched (I think so), they should be equally concerned about bonds. The bull market in bonds started in the early 1980s, and we are currently experiencing bond valuations that are unprecedented in the history of global bond markets. Reversion to mean will be a bloodbath if it ever occurs.
I share Warren Buffett's opinion on Gold. It is not an investment.
I also share his general view of buy and hold being the way to make and keep money. Pick solid dividend growth companies with decades of dividend raises under their belts, safe balance sheets, and buy them at a fair or better value, and you can get rich slowly while the magic of compounding does its work. It takes a certain mindset, and willingness to be patient, but anyone who stayed invested in a diversified basket of Dividend Kings and Dividend Aristocrats for the past 20-30 years is probably pretty pleased with their portfolio today.
Great that you mention bonds. Is bonds being all time high is the reason yields are all time low or are there other factors?
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(02-04-2020, 12:36 PM)vbin Wrote: (02-04-2020, 11:23 AM)Otter Wrote: I am not a fan of bonds. For anyone of the opinion that equity valuations are generally overstretched (I think so), they should be equally concerned about bonds. The bull market in bonds started in the early 1980s, and we are currently experiencing bond valuations that are unprecedented in the history of global bond markets. Reversion to mean will be a bloodbath if it ever occurs.
I share Warren Buffett's opinion on Gold. It is not an investment.
I also share his general view of buy and hold being the way to make and keep money. Pick solid dividend growth companies with decades of dividend raises under their belts, safe balance sheets, and buy them at a fair or better value, and you can get rich slowly while the magic of compounding does its work. It takes a certain mindset, and willingness to be patient, but anyone who stayed invested in a diversified basket of Dividend Kings and Dividend Aristocrats for the past 20-30 years is probably pretty pleased with their portfolio today.
Great that you mention bonds. Is bonds being all time high is the reason yields are all time low or are there other factors?
Yield on everything is depressed at the moment. Aside from the direct price/yield inverse relationship inherent in bonds, the abnormally low bond yield environment has likely triggered a substantial part of the gain in equities over the past decade. Starved of meaningful returns at the risk-free rate, investors have poured funds into the market, in a search for growth (and also yield on DGI stocks).
Eventually the pendulum will swing the other way, as it always does. I suspect the unwinding of the current status quo could be very messy.
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Welcome to the forum. I generally agree with what Otter shared. I don't hold any gold. If I was going to I wouldn't buy it unless the price was obviously very depressed. Long term I don't consider it a real investment. I have held bonds over the years. Things are different than they were now that we have rock bottom interest rates. Currently longer term bonds have the downside risk of stocks with little potential for reward. That may change someday but it won't be any year soon most likely. I do hold some extremely short term bond funds. They yield just over 2% so they are little different than a good CD. Basically cash.
They serve a purpose though. They store my cash in the event the stock market should drop enough to make valuations more attractive. At that time I would desire a larger % of my assets in the market. My advice to a new investor would be to select a dozen high quality DGI stocks in most of the 11 general sectors. Invest most of yuor port with dollar cost averaging. Over the course of a year there will be bargains and you can direct your purchases accordingly. I do buy and sell certain positions, but my advice would be to exercise patience. If your time-frame to invest is over a decade that has been sufficiently proven to be your best strategy. If you decide to trade, segregate a small amount of your portfolio for that. Trading is a good way to learn how the market reacts. You can learn the principles with a very small part of your holdings. Discipline is important, whether you hold everything forever or trade. It's harder than it looks when the market gets rough. We look forward to your future threads. We need more threads so feel free to start them as you desire. I think we are a helpful bunch.
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So for those of you that don’t do gold or bonds, what % of your investments are in stocks vs cash?
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(02-04-2020, 04:36 PM)jalanlong Wrote: So for those of you that don’t do gold or bonds, what % of your investments are in stocks vs cash?
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Keep context in mind as others answer this question. It depends on where you are in life. I am a few years from retirement and 60-40 stocks to cash as I regard the market as overvalued. Most of my stocks are DGI and Utes. I spent the preceding 30 years at 90%+ stocks. If the market were to dip hard I would go up from 60%.
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02-04-2020, 05:22 PM
(This post was last modified: 02-04-2020, 05:24 PM by Dividend Watcher.)
Otter & Fenders pretty much said it. No gold for me and bonds are generally out until we can get back to a real return on the 2-10 year spectrum. As I accumulate cash, I'll probably go Fenders route with the ultra-short term just to juice the yield a little.
Right now I'm at less than 1% cash in both my wife's and my IRAs. The 401(k) is about 4% cash but that's a small balance since I just started with this company about 4 years ago. I wouldn't recommend going that low in cash if you're just starting. The majority of my holdings are over 10 years old and I'm only adding in small bits with DRIPs and when something sells off because of short-term bad news. I'm primarily buy and hold but when something doesn't make sense with a company's future market or management, I'll dump it. That generally is only one or two companies every year or so. I recently had to trim MSFT just a tiny bit because it had become such a big portion of the portfolio. I swapped the proceeds for some higher yielding companies since we're only a few years to retirement.
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“While the dividend itself is merely a rearrangement of equity, over time it's more like owning an apple tree. The tree grows the apples back again and again and again, and the theoretical value of the tree doesn't change just because of when the apples are about to fall.” - earthtodan
I'm probably different from the rest, but outside of some savings for upcoming big expenses like property taxes and major house repairs, I am 100% stocks.
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I tend to be influenced by stories like this one. Average people who never made a huge salary but bought stocks and never sold them over decades and decades.
https://www.thebalance.com/how-anne-sche...ing-357847
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02-06-2020, 09:28 AM
(This post was last modified: 02-06-2020, 09:29 AM by fenders53.)
(02-06-2020, 08:48 AM)jalanlong Wrote: I tend to be influenced by stories like this one. Average people who never made a huge salary but bought stocks and never sold them over decades and decades.
https://www.thebalance.com/how-anne-sche...ing-357847
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"Time" is the secret. I started investing at an inopportune time. The late 90's. Bought all the best companies of the day. The future could not have looked brighter. I owned MSFT, CSCO, INTC, PFE, LU, JDSU, Ascend, Nortel etc. Buy and hold did not work out AT ALL. Half of those no longer exist. The total return on INTC, CSCO and PFE is next to zero after 20 years. Valuation WILL matter in the end. Dollar cost averaging is your friend.
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