08-24-2014, 01:36 PM
You are talking about essentially two different issues.
The larger issue is bonds versus stocks. My goal is to provide a growing income stream. Accumulating either stocks or bonds will get you there; however, good dividend stocks currently have a better inflation adjusted yield than the bond market. VYM (dividend) ETF has approximately a 2% greater yield than the VCIT (intermediate term corporate investment quality bond) ETF when adjusted for inflation.
I would consider buying the VCIT ETF if the inflation adjusted yield was higher than the VYM ETF. For corporate bonds, a mutual fund or ETF is the only practical option. Treasuries and municipal bonds are different, but I have my own biases against them.
For stocks, the decision to use an ETF or buy individual stocks will depend upon your inclination and ability to actively manage your stock portfolio. If you have the inclination, a young person should be able to actively manage a stock portfolio and do better than an ETF.
I am in my late fifties. Currently, I have individual stocks, but I plan on transitioning at least part of my portfolio to ETFs for retirement. The primary motive for this is that my wife does not have the inclination to actively manage the portfolio, so ETFs will be better if I suddenly die. In addition, we all will have less ability to actively manage a portfolio as we age.
The larger issue is bonds versus stocks. My goal is to provide a growing income stream. Accumulating either stocks or bonds will get you there; however, good dividend stocks currently have a better inflation adjusted yield than the bond market. VYM (dividend) ETF has approximately a 2% greater yield than the VCIT (intermediate term corporate investment quality bond) ETF when adjusted for inflation.
I would consider buying the VCIT ETF if the inflation adjusted yield was higher than the VYM ETF. For corporate bonds, a mutual fund or ETF is the only practical option. Treasuries and municipal bonds are different, but I have my own biases against them.
For stocks, the decision to use an ETF or buy individual stocks will depend upon your inclination and ability to actively manage your stock portfolio. If you have the inclination, a young person should be able to actively manage a stock portfolio and do better than an ETF.
I am in my late fifties. Currently, I have individual stocks, but I plan on transitioning at least part of my portfolio to ETFs for retirement. The primary motive for this is that my wife does not have the inclination to actively manage the portfolio, so ETFs will be better if I suddenly die. In addition, we all will have less ability to actively manage a portfolio as we age.