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Post by bobfl on Oct 30, 2022 12:59:28 GMT
What is your target yield (not including cap gains)? Do you have a target credit rating? Thanks
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Post by Deleted on Oct 30, 2022 13:30:20 GMT
What is your target yield (not including cap gains)? Do you have a target credit rating? Thanks 8-11% Investment grade or close to it (leverage ok) No preferreds or any individual issues
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Post by FD1000 on Oct 30, 2022 14:00:19 GMT
What is your target yield (not including cap gains)? Do you have a target credit rating? Thanks Too simple. Yield: you never start by looking at yield. You start by looking at the best risk/reward/valuation/what ever it means to you, options, after that you can look for yield. Several examples: AAPL vs ATT,IBM. AAPL has been a much better choice, see 5 year ( chart). SPY vs PDI,YYY(fund of CEFs). SPY was better than both for 3-5 years. See 5 year ( chart). SPY vs SCHD. In this case( chart), SCHD wins on both. Better performance + higher yield = you found a winner if you care about yield. Credit rating: similar concept. Search for best risk/reward funds, and then look for rating. Basically, total performance always comes first, after all, it includes everything. The above, of course, isn't a guarantee for future performance.
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Post by steadyeddy on Oct 30, 2022 14:22:40 GMT
What is your target yield (not including cap gains)? Do you have a target credit rating? Thanks My target yield is 6% - and I am crowding into bonds (ETFs/CEFs) to achieve that yield at the portfolio level. Particularly, CEFs are so distressed and they offer much better recovery potential. The key is to recognize that the FOMC is unlikely to drive the rates much higher than now.
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Post by steelpony10 on Oct 30, 2022 14:46:20 GMT
bobfl , Since we’re primarily buy and hold income investors with any capital gains secondary or “extra money”, in this market lull our yield is about 6.5%. In better markets it is usually in the 5-5.5% area but with added supplementary capital gains. Every month or quarter under any market conditions all excess income to needs is reinvested and compounded which results in increased incremental income each year.
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Post by Deleted on Oct 30, 2022 14:59:05 GMT
My current portfolio yield is 3.15% and that includes a 10% weighting of AAPL and 15% bonds/cash. If I include my non-yielding growth assets, it's less - slightly less than 3%. I don't really have a target as this is sufficient income - which is what I have used as a target. I do try to purchase dividend growth stocks with at least a 3% yield as one requirement.
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Post by bobfl on Oct 30, 2022 15:24:06 GMT
What is your target yield (not including cap gains)? Do you have a target credit rating? Thanks My target yield is 6% - and I am crowding into bonds (ETFs/CEFs) to achieve that yield at the portfolio level. Particularly, CEFs are so distressed and they offer much better recovery potential. The key is to recognize that the FOMC is unlikely to drive the rates much higher than now. Hoping that the credit based instruments dropped to reflect a forward looking 4.75-5% Fed Rate, but really think it is pricing in 4.25 to 4.5%.
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Post by bobfl on Oct 30, 2022 15:26:19 GMT
bobfl , Since we’re primarily buy and hold income investors with any capital gains secondary or “extra money”, in this market lull our yield is about 6.5%. In better markets it is usually in the 5-5.5% area but with added supplementary capital gains. Every month or quarter under any market conditions all excess income to needs is reinvested and compounded which results in increased incremental income each year. Exactly the way I think.
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Post by bobfl on Oct 30, 2022 15:46:25 GMT
What is your target yield (not including cap gains)? Do you have a target credit rating? Thanks Common sense varies based on personal experience and need. So maybe there is nothing "common" about sense.:-). השכל הישר הוא לא כל כך נפוץ
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Post by yogibearbull on Oct 30, 2022 15:50:21 GMT
The CME FedWatch, based on the fed fund futures market, shows 75, 50, 50 bps hikes at Nov, Dec, Feb FOMC to 4.75-5.00% terminal rate, then pause. IMO, the Fed pivot/pause/wait-and-see language may start to creep into the FOMC Statements and/or Powell's pressers. www.cmegroup.com/markets/interest-rates/cme-fedwatch-tool.html
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Post by bobfl on Oct 30, 2022 15:58:07 GMT
The CME FedWatch, based on the fed fund futures market, shows 75, 50, 50 bps hikes at Nov, Dec, Feb FOMC to 4.75-5.00% terminal rate, then pause. IMO, the Fed pivot/pause/wait-and-see language may start to creep into the FOMC Statements and/or Powell's pressers. www.cmegroup.com/markets/interest-rates/cme-fedwatch-tool.htmlQuestion is: What is built into the market at this moment? Credit is easier to be forward looking. Earnings not so much. I am sensing that credit volatility might slow whereas common equity will be affected by each earnings report.
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Post by yogibearbull on Oct 30, 2022 16:03:16 GMT
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Post by bugman on Oct 30, 2022 16:37:08 GMT
I'm around 6% myself, with preferred, CEF's, etc. all purchased at discount with a little upside potential.
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Post by habsui on Oct 30, 2022 16:41:57 GMT
Wrt yield, I would take 2% real yield (i.e. above inflation).
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Post by bobfl on Oct 30, 2022 18:38:46 GMT
Wrt yield, I would take 2% real yield (i.e. above inflation). So if the Fed gets it back to their 2% target, that's 4%.
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Post by bobfl on Oct 30, 2022 18:51:56 GMT
Maybe, but compare the 2. They both seem to be bouncing. ^vix maybe worse. I see some movement in fixed income, but not major real time volatility. Since these are about options, not sure that really reflects what is truly going on. The VIX just doesn't seem so extreme this cycle. Remember back when they said 40 is the new 20? :-)
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Post by habsui on Oct 30, 2022 19:03:30 GMT
Wrt yield, I would take 2% real yield (i.e. above inflation). So if the Fed gets it back to their 2% target, that's 4%. Yep. I live of about 3-3.25% withdrawal of PV. I'm 64 (retired 11 years ago).
According to my xls (every problem can be solved with a new spreadsheet), if I make 2% real return, there will be plenty left over (I run the xls until I'm 101)..
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Post by bobfl on Oct 30, 2022 19:14:09 GMT
So if the Fed gets it back to their 2% target, that's 4%. Yep. I live of about 3-3.25% withdrawal of PV. I'm 64 (retired 11 years ago).
According to my xls (every problem can be solved with a new spreadsheet), if I make 2% real return, there will be plenty left over (I run the xls until I'm 101).. Love my spreadsheets. We retired about the same age. But probably one major economic cycle before you. :-) At 6.28 - 6.50% and SS, there is plenty left over, except maybe less left over when I enter "the home". I remember relatives going in when it cost $3000 per month; now $12,000 per month. :-)
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Post by roi2020 on Oct 30, 2022 19:14:27 GMT
Wrt yield, I would take 2% real yield (i.e. above inflation). So if the Fed gets it back to their 2% target, that's 4%.
Whether or not the Fed achieves its 2% inflation target is currently unknown. Another important consideration is how long will it take inflation to reach "reasonable" levels (under 3.5%?).
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Post by habsui on Oct 30, 2022 19:18:15 GMT
So if the Fed gets it back to their 2% target, that's 4%.
Whether or not the Fed achieves its 2% inflation target is currently unknown. Another important consideration is how long will it take inflation to reach "reasonable" levels (under 3.5%?).
I agree. That's why I said I would take 2% real return. On that note, 5yr TIPS are/were paying 1.8% last week (breakeven inflation rate about 2.5%).
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Post by roi2020 on Oct 30, 2022 19:28:40 GMT
Whether or not the Fed achieves its 2% inflation target is currently unknown. Another important consideration is how long will it take inflation to reach "reasonable" levels (under 3.5%?).
I agree. That's why I said I would take 2% real return. On that note, 5yr TIPS are/were paying 1.8% last week (breakeven inflation rate about 2.5%).
5-year TIPS recently became much more attractive. In the October 20 auction, 5-year TIPS had a real yield of 1.732% which was a 15-year high.
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Post by yogibearbull on Oct 30, 2022 19:51:27 GMT
Breakeven Inflation Rate = Treasury Yield (nominal) - TIPS Yield (real). This breakeven inflation rate is also called inflation-EXPECTATIONS based on Treasuries and TIPs (vs others based on surveys or other data, an official example being by the Cleveland Fed). Unfortunately, CPI, PCE, PPI are LAGGING data and inflation-EXPECTATIONS are all one has. If the Fed waited by watching real rates as nominal rates - CPI (or, PCE), the economy would be long dead by then. Breakeven Inflation Rate fred.stlouisfed.org/graph/?g=Vq1t Cleveland Fed Inflation Expectation (click on Model Comparison & Term Structure) www.clevelandfed.org/indicators-and-data/inflation-expectations
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Post by Deleted on Oct 30, 2022 22:36:30 GMT
Breakeven Inflation Rate = Treasury Yield (nominal) - TIPS Yield (real). This breakeven inflation rate is also called inflation-EXPECTATIONS based on Treasuries and TIPs (vs others based on surveys or other data, an official example being by the Cleveland Fed). Unfortunately, CPI, PCE, PPI are LAGGING data and inflation-EXPECTATIONS are all one has. If the Fed waited by watching real rates as nominal rates - CPI (or, PCE), the economy would be long dead by then. Breakeven Inflation Rate fred.stlouisfed.org/graph/?g=Vq1t Cleveland Fed Inflation Expectation (click on Model Comparison & Term Structure) www.clevelandfed.org/indicators-and-data/inflation-expectationsThe difference between the nominal and the real yields is the value of the CPI for the previous month. From the graph they seems to be closing in on one another, Does that mean that tips are or are not a better buy now? Doesn't that require a guess about future CPI prints?
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Post by yogibearbull on Oct 30, 2022 22:45:08 GMT
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Post by habsui on Oct 31, 2022 0:00:30 GMT
So, what's the better deal: a 5yr TIPS or a 2yr TIPS (older TIPS on secondary market)?
To me the breakeven rate for 2yr TIPS seems low.
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Post by yogibearbull on Oct 31, 2022 1:01:51 GMT
habsui , I constructed the term-structure for TIPS/real rates by using Fido brokerage site, but beware that bond (any) quotes are unreliable when the markets are closed. Someone really interested may repeat this exercise tomorrow. Here are the YTMs (with appropriate and unknown inflation adjustments to be added) on Sunday night: Term YTM (TIPS/Real) 3-mo 0.401% 6-mo 1.596% 1-yr None found 1-yr, 3-mo 1.836% 2-yr 1.552% 5-yr None found 5-yr, 3-mo 1.619% FWIW, I prefer to use Treasury auctions only, so then, the only short-term choice is 5-yr TIPS (the next auction is on 12/22/22; the most recent one was on 10/20/22).
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Post by retiredat48 on Oct 31, 2022 3:35:56 GMT
Essentially all my assets are in IRAs--Trads and ROTH.
I am currently taking RMDs; and mostly live off of them.
So when I reached about age 65 I started converting to more of an income investor versus total return/growth theme.
I thus have a portfolio goal, or target goal, of 3% yield. With RMDs in the 4% range, this means I only have to generate withdrawals from capital of approx 1%; thus minimizing the affect of any bear market on my living needs.
From one to two years ago, I exited all my standard issue bond funds...sitting in Money Market and short term bond funds, with PATIENCE, awaiting the fed's raising of interest rates--which has now happened.
So I will be re-entering longer term fixed income markets, treasury and corporates (across credit quality)...just trying to maximize it/time it well.
I view the feds sledgehammer use of funds rates to try to control inflation, as the "GREAT FIXED INCOME OPPORTUNITY" of a lifetime for retirees. I thus expect my portfolio yield to get close to 4% or more.
R48
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Post by marquay on Oct 31, 2022 11:56:27 GMT
R48, good to know, thanks. I wished I had known to sell bonds last year or even early 2022 in my IRA's a/c. Now, I lost so much money.
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Post by bobfl on Oct 31, 2022 13:31:33 GMT
R48, good to know, thanks. I wished I had known to sell bonds last year or even early 2022 in my IRA's a/c. Now, I lost so much money. Marguay, You probably know all this, so skip it if it sounds too familiar. You only lose if you sell after things drop. Everything is cyclical and will return. Fed actions's primary function is to stop high inflation. They usually succeed even if they have to drive the economy into recession. Once that is done they drop rates and fixed income instruments come roaring back. Prices go up; yields drop. After their work is done, this time they will try to drop to a reasonable rate, not zero. What I learned after 20 years of living off my investments: 1. Inflation means the Fed will raise rates. Credit costs increase to corporations. So your stuff has to go down in price (yields go up) to match current credit costs or no one will buy you stuff. 2. When the Fed starts dropping rates, your fixed income things start increasing in price again because it can yield a lower rate to get buyers. 4. In 2008 I was surprised how much faster preferreds and bonds came back versus stocks. Credit stuff is based on the Fed rate; stocks on earning recovery. 5. Fixed income keeps coming, as long as you have companies with good credit ratings. You will feel better if you look at a long term chart of Fed find rates. It goes up; it goes down. Bonds parallel that. There is ONE "sell" signal: the word "inflation". When it is confirmed that "inflation is really heating up", sell out everything. Then set a condition for getting back in. I sold in Feb (hard to do quickly); then when yields on my stuff increased to + 6% (first time since 2009), I bought, with the understanding that the price could drop further. I saved a 20% decline; if it drops another 10% that will come back first.
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Post by Chahta on Oct 31, 2022 14:09:52 GMT
bobfl , Since we’re primarily buy and hold income investors with any capital gains secondary or “extra money”, in this market lull our yield is about 6.5%. In better markets it is usually in the 5-5.5% area but with added supplementary capital gains. Every month or quarter under any market conditions all excess income to needs is reinvested and compounded which results in increased incremental income each year. Why so low? I would think 8-9% would be your target with so many CEFs.
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