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Author: Goofyhoofy Big funky green star, 20000 posts Top Favorite Fools Top Recommended Fools Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 75383  
Subject: Re: high yield dividend funds Date: 1/18/2011 11:21 AM
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I see that you do not have a fixed income aspect to your portfolio. But what is a safe "fixed income position" today other than low interest CDs and cash itself?

Actually, I pretend that doesn't exist. You're right, I should have mentioned it. We have four years living expenses sitting in CD's, which aren't paying any interest at all. They are, however, FDIC, so that's why.

We have another two years in a bond fund, which isn't really a bond fund but a fund-of-bonds. (They don't trade, they merely buy bonds and use the coupons to fund redemptions. It's paying almost 5%, at the moment (with entirely high grade bonds). The payout keeps going down as older bonds mature and they are forced to buy newer ones. It's in a 401(k), and yes, if there were a sudden run they'd have to cut the payout, but so far at least (30 years) that's never happened. Having such a long time frame gives them the ability to purchase high quality long bonds at decent rates and then forget about them. In a declining interest environment (as we have been in for much of recent history, those locked-in rates are far better than I can find on the open market.))

I wonder how your selections match up against the Motley Fool Income Investor portfolio, or SDY, the S&P 1500 Dividend Aristocrat ETF. Should be a close match to either.

I have no idea. The portfolio is up about 10% since I bought it in early 2010 (coming out of cash where I dashed just before the big swoon), not including dividends, so it's probably more like 14% overall. I'd say that's about average, maybe a tad above or below. Dunno, really. I haven't paid that much attention. There's a reason for that: I'm not trying to "get rich." I'm trying to "stay rich". After years of spreadsheets and reading the back pages of company reports and doing all sorts of (boring) financial gymnastics, the reality is that we've retired. The portfolio (and other income sources) provide more than enough for our lifestyle, and I don't need to try to eke out every penny (nor do I need to check the price of eggs at the supermarket), so it's enough.

I wasn't posting that to say "This is the way to do it." I was saying "This is what I have done (recently), and maybe it will give somebody some suggestions on a way to think about it, too." There are lots of other options: low cost funds, ETF's, etc. none of which I use. And when I say "recently", that's because our investment style has changed several times across the years. In the 70's I got whacked a couple times on individual stocks. In the 80's it was mostly funds, and not particularly good ones, just what came easily through the 401(k) and a broker. In the 90's I became a momentum investor and profited nicely on the soaring valuations. And - luckily, I guess - got out in about 2000 before it all came back to earth. Now I'm into rock-solid, (mostly) long time well capitalized dividend payers, looking for income.

Anyway, that's the deal. I don't think posting my IRA portfolio is such a big deal. Other people do it on these boards, too. Here's one that a fellow puts up "for ridicule and comment" (but then tends to be dismissive of any ridicule or comments ;)
http://boards.fool.com/jeff8217s-portfolio-for-ridicule-comm...

In addition to the CD's and bond fund, I guess I should mention that we have an income producing property (rental condo), but what we do not have (and what an advisor told us we should have) is commodities (oil, wheat, gold, etc.) or more exposure to emerging markets. Those are for balance, as they are said to move opposite the markets. Doesn't seem to be true at the moment, but whatever....

Thanks for the comments.
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