I have been struggling to understand a problem that I am going to refer to as the ‘yield paradox.’ Yields for individual asset classes look low. The 10-year Treasury bond is yielding about 1.9%, and 30-year Treasury bonds are yielding a similarly paltry 3%. The S&P 500 is yielding 2.1%, which is very low by comparison to historical levels. Investment-grade corporate bond indexes are yielding less than 4% (see LQD, for example, at 3.8%). Given that the official rate of inflation for 2012 was 1.7%, these yields mean that investors are getting very little yield net of inflation. The very low yields on bonds and on stock indexes is a direct result of the Fed’s actions in holding interest rates at historical lows via Quantitative Easing. We have not yet gotten to the paradox. (more…)
Posts Tagged ‘mortgage reits’
The Yield Paradox
Posted in Asset Allocation, Bonds, Dividends, Risk, Stock Investing, tagged Corporate Bonds, junk bonds, Master Limited Partnerships, MLPs, Monte Carlo Simulation, mortgage reits, Municipal Bonds, Quantitative Easing, Treasury bonds, yield paradox on January 31, 2013 | 2 Comments »
Sector Watch: Retail REITs
Posted in Asset Allocation, Diversification, financial planning, Investors, Market Outlook, Risk, Stock Investing, tagged Apple stores, David Swensen, folios, mortgage reits, mortgage securities, Real Estate, real estate investment trusts, REITs, retail property, Retail REITs on October 12, 2012 | 2 Comments »
Real Estate Investment Trusts (REITs) are companies that own and, typically, manage real estate investments to generate income. REITs may also invest in mortgage securities (these are called mortgage REITs or mREITs). REITs may specialize in specific types of properties. The Folio Investing Retail REIT Folio holds equal-weight allocations to the largest publicly-listed REITs that own and manage shopping centers, outlet malls, and urban retail property. Retail stores lease space from the REITs and the leases are the primary source of income. (more…)
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