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 ‘Municipal Bonds’
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 »
What Are the Core Asset Classes for Total Return Portfolios?
Posted in Asset Allocation, Bonds, Commodities, Diversification, ETFs, Inflation, Investors, Risk, Stock Investing, tagged Corporate Bonds, emerging market stocks, Emerging Markets, equity energy, fixed income, gold, government bonds, investing strategy, Municipal Bonds, real estate investment trusts, REITs, stock market index, TIPS, Utility stocks on November 28, 2012 | 1 Comment »
One of the most important questions for investors and advisors is identifying a set of asset classes that will be considered for inclusion in a portfolio. Some people will decide that all they need or want is one broad stock market index fund and one bond fund. Others will choose to include Real Estate Investment Trusts (REITs) and commodities. There are well-thought-out arguments that inflation-protected government bonds (TIPS) are a major core asset class. It is also quite common for investors or advisors to break stocks out into value vs. growth and small cap vs. large cap. (more…)
Sector Watch: Municipal Bonds
Posted in 401(k), Asset Allocation, Bonds, ETFs, pensions, Retirement, retirement income, retirement planning, Risk, Taxes, Uncategorized, tagged Bill Gross, fixed income, folios, high yield bonds, income exempt, interest rates, Meredith Whitney, muni, Municipal Bonds, public pensions, QE, Quantitative Easing, Target Date Folios, Treasury bonds on November 19, 2012 | Leave a Comment »
Municipal bonds are issued by states and municipalities and typically have tax advantages relative to other fixed income assets. In general, income from muni bonds is tax exempt at the federal level and at the state level for investors living in the issuing state. Municipal bonds have historically been favored by investors in high tax brackets who, of course, derive more benefit from the tax exemptions by virtue of being in the highest tax brackets. (more…)
Municipal Bonds: Buying Opportunity?
Posted in Bonds, Income Investing, tagged Bill Gross, Bond Funds, Creekside Partners, General Obligation Bonds, MUB, Municipal Bond Investing, Municipal Bonds, Munis, PIMCO, Rick Ashburn on January 31, 2011 | Leave a Comment »
State and cities are in a world of pain at the moment as they face another year of gut wrenching (and politically unpopular) service cutbacks and layoffs. Once again they must balance their budgets in the face of possible declines in Federal funds to states and drooping real estate tax revenue. That cold reality combined with the prediction of influential analyst Meredith Whitney that numerous municipal bankruptcies could be coming down the pike, fueled a three-month long drop in municipal bonds. In the last two months, $25 billion has also been withdrawn from mutual bond funds.
Could this be a buying opportunity? (more…)
What Type of Investor Are You?
Understanding your investing profile to achieve your financial goals starts with a few simple questions. The Investor Questionnaire, by Folio Investing, will help you understand your investment time horizon, investor profile and level of risk.
Take Investor Questionnaire-
Folio Investing offers online investing and stock trading to help you reach your investment goals with automated portfolio tools and low-commission or flat-fee pricing.
We're the online brokerage that makes smart investing simple. Picking Stocks and Folio Investing
Subscribe to RSS Feed
Archive
- May 2013
- April 2013
- March 2013
- February 2013
- January 2013
- December 2012
- November 2012
- October 2012
- September 2012
- August 2012
- July 2012
- June 2012
- May 2012
- April 2012
- March 2012
- February 2012
- January 2012
- December 2011
- November 2011
- October 2011
- September 2011
- August 2011
- July 2011
- June 2011
- May 2011
- April 2011
- March 2011
- February 2011
- January 2011
- December 2010
- November 2010
- October 2010
- September 2010
- August 2010
- July 2010
- June 2010
Link to Posts by Topic
-
Recent Posts
Most Read
- The Cost of Performance Chasing
- Can You Get 7% Per Year in Income with Only Moderate Risk?
- REIT Yield as a Predictor of Future Returns
- How To Measure Your Investment Portfolio -- Part One: Volatility & Beta
- Investing Book Review: Jim Otar's Unveiling the Retirement Myth
- Risk, Return and Low Beta Stocks
- What Are the Core Asset Classes for Income Portfolios?
- Why Warren Buffett Was Right: "Diversification is Protection Against Ignorance"
- Explaining the Value Premium
- Why Low Beta Stocks Are Worth a Look
