I’ve had a 5 year CD come due and the current rates are under 1%. I’ve got enough exposure to individual stocks and I’d like to get some income out of this money with not too much risk to capital. The obvious move seems to buy more VDE (oil etf) but it is up 50% YTD and could be due for a pull back. And I was think a REIT etf but I know nothing about them.
Open to other ideas too. I wont need the capital at any point over next 10 years but obviously a risk averse at this point.
Vegas roulette table, always bet on black!!
Coal stocks.
Are you looking for income, or growth, or a combination?
I am no longer in what I would call the accumulation phase, but more in the preservation phase. I will always be in the market, but I have been making our portfolios more conservative. So my preferences may not be yours.
REITs are touted as paying high returns, and they do, but the tax situation of the payouts are more complicated than traditional dividend paying stocks. Some of their payouts are classified as return of capital (not taxed, but reducing your tax basis and creating ordinary income and not capital gain income when sold), some as interest, some as dividends (generally not qualified dividends, so taxed as ordinary income). Also, they are generally not for the risk averse, since real estate is one one of the first sectors that rise in good times and fall in not so good times. I think that the REIT ETFs returns are treated the same. I no longer own any, but once did.
For income, I have ridden SCHD (Schwab Dividend Equity Fund ETF, current dividend 2.8%) and VIG (Vanguard Dividend Appreciation ETF, 1.5%) for so long that the tax implication of selling them would be, well, taxing. That means, like many broad based stock ETFs, they are near their all time highs. I will probably continue to hold them through good and bad. We’re probably 40-45/55-60% stocks/bonds & preferreds.
I also hold a growing amount of VTEB, a muni ETF, simply because we don’t need any more taxable income. I watch it closely, though, as interest rates will someday rise and investments that rely on interest payments may well decline in value. I can handle that, just not too much of that.
Those could do well but they’re high risk choices
Depends on the time horizon for the $$$. It also depends on what you have in stocks / index funds and whatever cash you have to your name
In a rising interest rate environment which is a falling bond market and/or a declining stock market, you’ll be happy to have some cash available
If rates fall more or the stock market rises, cash may aggravate you as inflation devalues your money
If you find something let us know. I’ve got mid 5 figures sitting in what basically is a money market account, although the bank calls it something different. It’s earning .4%. As a percentage of net worth, I’ve got a lot in mutual funds, somewhat conservative. I would love to have a better option for the cash.
I-Bonds are a good option but that is very limited.
They’re best to be purchased three days before the end of the month. I think they’re limited to either $5k or $15k per year. They have a one year holding period and you forfeit the last 3 months interest if not kept 5 years. I believe they’re paying in the high 1s because the 2nd six months could be 0%.
Probably income with capital protection. I know neither can be guaranteed.
Good info, think I’ll stay away from Reits. Whatever I buy I can afford to keep if the price goes down because I won’t need access to this money.
Jim, tell me more about vteb. Think my dad could be interested in that.
You cant really do much without some risk in todays low interest rate environment.
You already know I love real estate, but I actually dont own any REITs directly. I don’t care much about the taxability because my accountant works through all that. I have thought at some point when I retire, I would dump all my physical real estate and buy REITs. I can achieve the same returns with less hassle, but also with less tax benefits.
I actually do a lot of Dividend Growth Investing in my tax deferred accounts since the distributions are non-taxable. I have also been purchasing some CEFs recently to see how those hold up in a rising interest rate environment.
I just looked this over and seems like pretty decent tax-free yield and of course the excellent low expense ratio. This fund looks like it holds mid-range maturity debt. Do you swap funds based on whether we are in a rising or declining interest rate environment ?
I started buying VTEB 4 years ago, which has been an era of relatively low interest rates. There was a 7-8% drop in the value when interest rates fell quickly early in 2020, but the ETF jumped quickly back up to the trend line and is still on it. I am buying more as cash becomes available, but keeping an eye on things. As long as it is favored investment by almost all pundits, I expect the price to maintain. It currently yields 1.8%.
I have also owned SUB (Ishares short term munis mutul fund) for a year or so. It has not performed as well as VTEB, but I wanted to be into short terms where savvy bond traders can make more money than the interest payment. Hasn’t happened yet.
How about this Jim and everybody else? I don’t know much about it, but the dividend is about 7% APR that pays monthly. The price is $25 per share with a very small trading range over the last 5 years.
A little too close to the edge for me. They’re pretty leveraged also. The more something is leveraged the lesser the event needed to cause harm. I own and follow preferred shares and there aren’t many that pay 7% (best yield I own is BofA yielding just under 5%), and the ones that do are the riskiest out there.
If I was buying, I wouldn’t put a lot into that but recognize it for the risk it is.
It looks too risky. Covered calls, junk bonds, and preferred stocks are in the portfolio. The quality of the preferred stocks is necessary to know
A balanced fund is probably less risky. It seems like you’re looking for a 30-40% stocks range which is very conservative. You don’t want to be chasing yield as that increases your risk. Probably a good idea to get a portfolio list and asset allocation from an advisor
This is a Jimb question. I think the board is still up
Good stuff Jim…think I’ll put the money in my TD Ameritrade account and wait for a pullback and buy more growth and value stocks.
If you are going to buy growth, at least follow GARP.
I buy AMZN every time it pulls back 10%
AMLP- A mutual fund of pipeline companies. It issues nice dividends, and no K-1s to fool with.
HTGC is the Berkshire Hathaway of internet startups and yields about 7% also.
Interesting stuff, might throw 25k into each. Was hoping last week was the start of a correction but the market was higher for the week.