Strategies for seeking 3-4% return at minimal risk?

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Rocky_Mtn_Expat
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Strategies for seeking 3-4% return at minimal risk?

Post by Rocky_Mtn_Expat »

I'm trying to find decent investment options for a sum of money that is neither part of our emergency fund nor part of our retirement portfolio. It doesn't have an immediate purpose, but I don't want to treat it the same way that I treat long-term assets invested for retirement.

The sum is between 150k to 200k, which is very material to us. I was initially considering just leaving it in a high yield savings account for a while, but the returns on that have gone from around 1.25% to 0.60%, so that seems like a bad option.

While we don't have an immediate use for it, I am somewhat sensitive to erosion of principal and market volatility, so I don't want to do anything risky with it. That said, I'm willing to accept a little risk, and I recognize you have to take some in order to get any kind of real return.

So with all that being said, what I'm looking for are investment options where we can hopefully yield 3 or 4% on it while accepting modest market risk.

Any thoughts?

(The EF and retirement accounts are funded and we are at zero debt, so please don't factor those considerations into any recommendations).
7eight9
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Re: Strategies for seeking 3-4% return at minimal risk?

Post by 7eight9 »

It may or may not be a good option for you but multi-year guaranteed annuities would be worth a look.

Multi-Year Guarantee Annuities (MYGAs) are also called fixed-rate annuities and are a specific annuity product type that functions similarly to a CD (Certificate of Deposit).
Both MYGAs and CDs contractually guarantee an annual interest rate for a specified period, have no annual fees and are fully principal protected.

Read more at --- https://www.stantheannuityman.com/myga-rates
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Rocky_Mtn_Expat
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Re: Strategies for seeking 3-4% return at minimal risk?

Post by Rocky_Mtn_Expat »

Thanks for the suggestion. Candidly, I've always heard annuities are very bad investment products. I don't think that's something I would want to explore, but I appreciate your thoughts.
antman50
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Re: Strategies for seeking 3-4% return at minimal risk?

Post by antman50 »

Unfortunately, I do not think you're going to find anything that meets those characteristics. With rates being negative across the board (https://www.treasury.gov/resource-cente ... =realyield), you're going to have to take some risk in order to generate a meaningful return. In this environment, I do believe that 4% is a meaningful number from comfortable traditional approaches.

One way to do so is to blend together a number of uncorrelated and unpopular investments but it doesn't sound like that's what you're looking to do.

https://docsend.com/view/taygkbn

TLDR : 20% Stocks, 20% Govt Bonds, 20% Longvol/TAIL, 20% Commodity Trend, 20% Gold
delamer
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Re: Strategies for seeking 3-4% return at minimal risk?

Post by delamer »

What do you consider modest risk?

What is the ultimate purpose of these funds, if not emergency fund or retirement?
7eight9
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Re: Strategies for seeking 3-4% return at minimal risk?

Post by 7eight9 »

There are "good" annuities and there are "bad" annuities. MYGAs are in the former category. If you aren't familiar with them I would consider searching this forum for "MYGA" and reading some of the recent threads. I suspect that they aren't what you are thinking about when you contemplate the word "annuity".
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k1982
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Re: Strategies for seeking 3-4% return at minimal risk?

Post by k1982 »

fixed annuity
it is guaranteed fixed interest rate... for 3 - 10 years
you will get bigger returns from a B rated insurance company 3-3.5%
and smaller returns from A + insurance company 1 -2%

that is your best choice for now
tibbitts
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Re: Strategies for seeking 3-4% return at minimal risk?

Post by tibbitts »

Rocky_Mtn_Expat wrote: Thu Oct 08, 2020 12:27 pm Thanks for the suggestion. Candidly, I've always heard annuities are very bad investment products. I don't think that's something I would want to explore, but I appreciate your thoughts.
Although annuities, including MYGAs, are certainly more complicated than a bank account, it's not fair to write them off as necessarily bad, and it's kind of alarming that you'd base an investment decision on "I've always heard." I have an annuity now and have had others in the past that have been good investments.
Last edited by tibbitts on Thu Oct 08, 2020 12:38 pm, edited 1 time in total.
rkhusky
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Re: Strategies for seeking 3-4% return at minimal risk?

Post by rkhusky »

Try Lifestrategy Income or Intermediate Corporate Bond or a 10/90 mix of Total Stock/Total Bond.
Last edited by rkhusky on Thu Oct 08, 2020 12:39 pm, edited 1 time in total.
tibbitts
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Re: Strategies for seeking 3-4% return at minimal risk?

Post by tibbitts »

It would help if the OP would define "modest market risk" in terms of principal fluctuation that would be acceptable.
jrbdmb
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Re: Strategies for seeking 3-4% return at minimal risk?

Post by jrbdmb »

You might consider investing this pile of money at it's own AA - x% equities, (100-x)% fixed income. The percentage you put into equities would be based on your willingness to accept "modest risk."

In my case money in a taxable account not earmarked for a specific near-term purpose is invested at 25% equites / 75% short term fixed income. I'm OK with a potential 12.5% loss. Adjust your percentages as needed. Or as mentioned above select a LifeStrategy fund that has an AA comfortable to you.
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anon_investor
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Re: Strategies for seeking 3-4% return at minimal risk?

Post by anon_investor »

I suggest the Vanguard LifeStrategy Income Fund (VASIX) or Vanguard Target Retirement Income Fund (VTINX).
ridebikeseveryday
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Re: Strategies for seeking 3-4% return at minimal risk?

Post by ridebikeseveryday »

Buy EE bonds and hold them for 20 years. Guaranteed 3.5% with treasury-level risk.
softwaregeek
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Re: Strategies for seeking 3-4% return at minimal risk?

Post by softwaregeek »

ridebikeseveryday wrote: Thu Oct 08, 2020 12:50 pm Buy EE bonds and hold them for 20 years. Guaranteed 3.5% with treasury-level risk.
This. There is no free lunch. You want returns, you have to lock up your money. Myga's are a good choice too, but you have to be 59.5, (I think) before you can earn without penalty.
tibbitts
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Re: Strategies for seeking 3-4% return at minimal risk?

Post by tibbitts »

ridebikeseveryday wrote: Thu Oct 08, 2020 12:50 pm Buy EE bonds and hold them for 20 years. Guaranteed 3.5% with treasury-level risk.
True but purchase limits apply, and before 20 years there is very little income under the current EE bond terms.
rmgatl
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Re: Strategies for seeking 3-4% return at minimal risk?

Post by rmgatl »

I like high yield so long as the feds keep backstopping it.
5% without that much risk so long as bond markets continue to be strongly manipulated.
tibbitts
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Re: Strategies for seeking 3-4% return at minimal risk?

Post by tibbitts »

rmgatl wrote: Thu Oct 08, 2020 7:08 pm I like high yield so long as the feds keep backstopping it.
5% without that much risk so long as bond markets continue to be strongly manipulated.
The OP needs to decide how much risk is acceptable. If there is some change in external factors (the "backstopping" you mention), they might not come with an advanced warning to avoid losses. I do invest in high yield but look at it as more of a stock/bond hybrid, and I won't try to argue with people who say you could obtain the same results with some equity/higher-rated-bond split.
protagonist
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Re: Strategies for seeking 3-4% return at minimal risk?

Post by protagonist »

If it is any consolation, if you can get 1-2% (which is doable) I think you will stand a very good chance at beating inflation in the short run.

My strategy is , rather than getting locked in to something closer to 2% and having to tie up my money for years , I am settling for 1-1.5% in a MM acct. and will re-assess with time.

Of course if you want to do better you could play the bank promotion game and get a much higher rate over a 3-6 month period, but if you are looking for a place to stash a fair amount of money that can be something of a time consuming hassle.

As long as the fixed income part of my portfolio keeps up with (and hopefully beats) inflation it is serving its purpose.
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Re: Strategies for seeking 3-4% return at minimal risk?

Post by Kevin M »

Rocky_Mtn_Expat wrote: Thu Oct 08, 2020 12:18 pm <snip>
The sum is between 150k to 200k, which is very material to us.
<snip>
While we don't have an immediate use for it, I am somewhat sensitive to erosion of principal and market volatility, so I don't want to do anything risky with it. That said, I'm willing to accept a little risk, and I recognize you have to take some in order to get any kind of real return.

So with all that being said, what I'm looking for are investment options where we can hopefully yield 3 or 4% on it while accepting modest market risk.
No risk, a little risk, modest risk?

For any of these, 3-4% in the current environment is unrealistic.

Start by looking at (nominal) Treasury yields, which are riskless in nominal terms if you match duration to investment horizon. Here are a few from today:

1-month: 0.09%
1-year: 0.13%
5-year: 0.33%
10-year: 0.78%
20-year: 1.34%

So obviously nowhere close to your desired yield.

You can do better with a high-yield savings account, which you are already using, which gives you a significantly higher yield than the 1-month Treasury yield of 0.09%. For a somewhat longer term, you can do significantly better with a direct CD (bought directly from a bank or credit union)--maybe 1% for a 1-year, and 1.5% for a 5-year.

EE bonds were mentioned, and yeah, compared to a 20-year Treasury, the 3.5% return is great, but you must hold for 20 years to get that return, and that involves significant unexpected inflation risk. And the $10K per year purchase limit eliminates this as much help for $150-$200K.

Speaking of inflation risk, you should look at TIPS yields to get an idea of riskless real yields. The 5-year TIPS yield is -1.23%, and the 20-year is -0.52%. So the best you can do in real terms is lock in a guaranteed loss of purchasing power. The exception, for relatively small amounts, are I bonds, for which you can earn 0% real if you hold for at least five years, but again, the annual purchase limits are a limitation.

Regarding purchase limits for EE and I bonds, a couple can buy $20K per year, and with a living trust you could buy an additional $10K per year. So between now and early next year, you could buy $40K to $60K each of EE and I bonds, as a couple. Personally, I got rid of all of my I bonds because I didn't want my heirs to have to deal with TreasuryDirect, and I'm not comfortable with the inflation risk of EE bonds.

MYGAs were mentioned, but clearly these have credit risk. Your state insurance might cover some or all of this risk, depending on the amount and your state. My state, CA, only covers 80%, so I don't consider them as anywhere close to low risk.

You can find reward checking accounts earning 3% or so, but these have balance caps of $10K-$30K or so, so again, doesn't help much for the amount you're talking about.

Other than deposit account products and savings bonds, which institutional investors can't take advantage of, pretty much any other investment offering more than the riskless rate has, by definition, a corresponding amount of risk. This is a fundamental aspect of investing. If it were otherwise, everyone would pile into the lower risk, higher return investment, driving the price up until the risk-adjusted expected return was competitive in the current environment.

Kevin
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tibbitts
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Re: Strategies for seeking 3-4% return at minimal risk?

Post by tibbitts »

protagonist wrote: Thu Oct 08, 2020 7:55 pm If it is any consolation, if you can get 1-2% (which is doable) I think you will stand a very good chance at beating inflation in the short run.

My strategy is , rather than getting locked in to something closer to 2% and having to tie up my money for years , I am settling for 1-1.5% in a MM acct. and will re-assess with time.

Of course if you want to do better you could play the bank promotion game and get a much higher rate over a 3-6 month period, but if you are looking for a place to stash a fair amount of money that can be something of a time consuming hassle.

As long as the fixed income part of my portfolio keeps up with (and hopefully beats) inflation it is serving its purpose.
Where are you getting those returns on a MM account?
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Re: Strategies for seeking 3-4% return at minimal risk?

Post by nix4me »

20/80 stock/cash.
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Re: Strategies for seeking 3-4% return at minimal risk?

Post by strongboy2005 »

Pay off mortgage
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Re: Strategies for seeking 3-4% return at minimal risk?

Post by Stinky »

Rocky_Mtn_Expat wrote: Thu Oct 08, 2020 12:27 pm Thanks for the suggestion. Candidly, I've always heard annuities are very bad investment products. I don't think that's something I would want to explore, but I appreciate your thoughts.
Do a little more research before you discard MYGAs as a possibility.

Go to the previously mentioned site Stan the Annuity Man and blueprintincome.com to learn more. And look at this recent thread.

viewtopic.php?f=1&t=313935

Post back if you want to pursue this more.
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Re: Strategies for seeking 3-4% return at minimal risk?

Post by Investors Mind Money »

Without taking risk, 3% to 4% return is going to be a challenge. And as this is going to be a taxable account, after tax return would be even lower depending your tax bracket.
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Re: Strategies for seeking 3-4% return at minimal risk?

Post by Ben Mathew »

Just find the stock/bond AA between 0/100 and 100/0 that gives you the desired balance between risk and return.
bedon
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Re: Strategies for seeking 3-4% return at minimal risk?

Post by bedon »

antman50 wrote: Thu Oct 08, 2020 12:28 pm One way to do so is to blend together a number of uncorrelated and unpopular investments but it doesn't sound like that's what you're looking to do.

https://docsend.com/view/taygkbn

TLDR : 20% Stocks, 20% Govt Bonds, 20% Longvol/TAIL, 20% Commodity Trend, 20% Gold
Have you implemented the "dragon" portfolio yourself? I'm wondering if you have found a practical (more passive) way to implement the "long volatility" and the "commodity trend" part of the portfolio?
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Re: Strategies for seeking 3-4% return at minimal risk?

Post by anon_investor »

tibbitts wrote: Thu Oct 08, 2020 8:51 pm
protagonist wrote: Thu Oct 08, 2020 7:55 pm If it is any consolation, if you can get 1-2% (which is doable) I think you will stand a very good chance at beating inflation in the short run.

My strategy is , rather than getting locked in to something closer to 2% and having to tie up my money for years , I am settling for 1-1.5% in a MM acct. and will re-assess with time.

Of course if you want to do better you could play the bank promotion game and get a much higher rate over a 3-6 month period, but if you are looking for a place to stash a fair amount of money that can be something of a time consuming hassle.

As long as the fixed income part of my portfolio keeps up with (and hopefully beats) inflation it is serving its purpose.
Where are you getting those returns on a MM account?
+1, where can I find a MM account with those returns? Sign me up.
ivgrivchuck
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Re: Strategies for seeking 3-4% return at minimal risk?

Post by ivgrivchuck »

Rocky_Mtn_Expat wrote: Thu Oct 08, 2020 12:18 pm
Any thoughts?
You can't get any meaningful returns without taking some risk. When investing in stock market, you need to be mentally prepared to lose 50% of your investment.

Let's assume that you had $200k. Would it be okay that after a couple of years, you only had $180k (e.g. due to market crash)? If that's the case, you should invest $40k into stock market and keep $160k in CDs, I-bonds and/or savings account (MYGAs are also okay).

So it comes to down to your risk tolerance which will determine your stock/cash allocation.
44% VTI | 36% VXUS | 10% I-bonds | 10% EE-bonds
ivgrivchuck
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Re: Strategies for seeking 3-4% return at minimal risk?

Post by ivgrivchuck »

protagonist wrote: Thu Oct 08, 2020 7:55 pm My strategy is , rather than getting locked in to something closer to 2% and having to tie up my money for years , I am settling for 1-1.5% in a MM acct. and will re-assess with time.
1-1.5% MM account? You must be joking...
44% VTI | 36% VXUS | 10% I-bonds | 10% EE-bonds
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Re: Strategies for seeking 3-4% return at minimal risk?

Post by mrspock »

nix4me wrote: Thu Oct 08, 2020 8:53 pm 20/80 stock/cash.
+1 Honestly.... I think this is the best suggestion. Rebalance quarterly. Preferred stock fund (e.g. PFF, PFFD) might be an option too....
Last edited by mrspock on Fri Oct 09, 2020 3:07 am, edited 1 time in total.
vsquid
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Re: Strategies for seeking 3-4% return at minimal risk?

Post by vsquid »

mrspock wrote: Fri Oct 09, 2020 1:07 am
nix4me wrote: Thu Oct 08, 2020 8:53 pm 20/80 stock/cash.
+1 Honestly.... I think this is the best suggestion. Rebalance quarterly.
This. You can keep the cash portion on a high-yield savings account.
protagonist
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Re: Strategies for seeking 3-4% return at minimal risk?

Post by protagonist »

ivgrivchuck wrote: Fri Oct 09, 2020 12:49 am
protagonist wrote: Thu Oct 08, 2020 7:55 pm My strategy is , rather than getting locked in to something closer to 2% and having to tie up my money for years , I am settling for 1-1.5% in a MM acct. and will re-assess with time.
1-1.5% MM account? You must be joking...
I'm not sure how easy it is to get into this if you don't live in MS or LA. Currently APY hovers around 1.4%-1.45% last I checked. It is a 6 month promo rate, but the rate is guaranteed at 1% over their regular HIMMA rate, and though only applicable for "new money", I was told that after the promo period ends you could close the account and re-open immediately with "new money".
https://www.kfcu.org/himma-plus/
protagonist
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Re: Strategies for seeking 3-4% return at minimal risk?

Post by protagonist »

anon_investor wrote: Fri Oct 09, 2020 12:15 am
tibbitts wrote: Thu Oct 08, 2020 8:51 pm
protagonist wrote: Thu Oct 08, 2020 7:55 pm If it is any consolation, if you can get 1-2% (which is doable) I think you will stand a very good chance at beating inflation in the short run.

My strategy is , rather than getting locked in to something closer to 2% and having to tie up my money for years , I am settling for 1-1.5% in a MM acct. and will re-assess with time.

Of course if you want to do better you could play the bank promotion game and get a much higher rate over a 3-6 month period, but if you are looking for a place to stash a fair amount of money that can be something of a time consuming hassle.

As long as the fixed income part of my portfolio keeps up with (and hopefully beats) inflation it is serving its purpose.
Where are you getting those returns on a MM account?
+1, where can I find a MM account with those returns? Sign me up.
https://www.kfcu.org/himma-plus/ Around 1.4% APY last I checked. My other bank account at SFGI Direct is getting 0.81% as of today, but that has been declining.
Last edited by protagonist on Fri Oct 09, 2020 12:02 pm, edited 1 time in total.
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Re: Strategies for seeking 3-4% return at minimal risk?

Post by KingRiggs »

protagonist wrote: Fri Oct 09, 2020 11:56 am
anon_investor wrote: Fri Oct 09, 2020 12:15 am
tibbitts wrote: Thu Oct 08, 2020 8:51 pm
protagonist wrote: Thu Oct 08, 2020 7:55 pm If it is any consolation, if you can get 1-2% (which is doable) I think you will stand a very good chance at beating inflation in the short run.

My strategy is , rather than getting locked in to something closer to 2% and having to tie up my money for years , I am settling for 1-1.5% in a MM acct. and will re-assess with time.

Of course if you want to do better you could play the bank promotion game and get a much higher rate over a 3-6 month period, but if you are looking for a place to stash a fair amount of money that can be something of a time consuming hassle.

As long as the fixed income part of my portfolio keeps up with (and hopefully beats) inflation it is serving its purpose.
Where are you getting those returns on a MM account?
+1, where can I find a MM account with those returns? Sign me up.
https://www.kfcu.org/himma-plus/ Around 1.4% APY last I checked.
It's 0.45%, with a 1% bonus for six months...not exactly what you were touting...
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protagonist
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Re: Strategies for seeking 3-4% return at minimal risk?

Post by protagonist »

KingRiggs wrote: Fri Oct 09, 2020 12:01 pm
protagonist wrote: Fri Oct 09, 2020 11:56 am
anon_investor wrote: Fri Oct 09, 2020 12:15 am
tibbitts wrote: Thu Oct 08, 2020 8:51 pm
protagonist wrote: Thu Oct 08, 2020 7:55 pm If it is any consolation, if you can get 1-2% (which is doable) I think you will stand a very good chance at beating inflation in the short run.

My strategy is , rather than getting locked in to something closer to 2% and having to tie up my money for years , I am settling for 1-1.5% in a MM acct. and will re-assess with time.

Of course if you want to do better you could play the bank promotion game and get a much higher rate over a 3-6 month period, but if you are looking for a place to stash a fair amount of money that can be something of a time consuming hassle.

As long as the fixed income part of my portfolio keeps up with (and hopefully beats) inflation it is serving its purpose.
Where are you getting those returns on a MM account?
+1, where can I find a MM account with those returns? Sign me up.
https://www.kfcu.org/himma-plus/ Around 1.4% APY last I checked.
It's 0.45%, with a 1% bonus for six months...not exactly what you were touting...
You don't have to maintain the balance for 6 months. My understanding (acc. to a rep) is that it is a compound rate of 1% over what they offer in their regular HIMMA, not a "bonus" you receive at the end. The regular HIMMA is getting around 0.4%. After 6 months your HIMMA Plus acct. will be downgraded to a regular HIMMA. But acc. to the same rep., after 6 months, if you close the account you can re-open with a new HIMMA Plus as "new money".

Hopefully this info was accurate.

https://www.kfcu.org/rates/

High Interest Money Market (HIMMA) Plus
Opening Balance2

Rate1

APY3

1Promotional rate will revert to standard HIMMA rate after the term.
2New money only. $2,500 minimum to open account and to earn dividends.
3Annual Percentage Yield.

$2,500.00 - $9,999.99

1.34%

1.35%

$10,000.00 - $49,000.99

1.34%

1.35%

$50,000.00 - $99,000.99

1.39%

1.40%

Balances $100,000.00 and above

1.44%

1.45%
antman50
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Re: Strategies for seeking 3-4% return at minimal risk?

Post by antman50 »

bedon wrote: Thu Oct 08, 2020 11:41 pm
antman50 wrote: Thu Oct 08, 2020 12:28 pm One way to do so is to blend together a number of uncorrelated and unpopular investments but it doesn't sound like that's what you're looking to do.

https://docsend.com/view/taygkbn

TLDR : 20% Stocks, 20% Govt Bonds, 20% Longvol/TAIL, 20% Commodity Trend, 20% Gold
Have you implemented the "dragon" portfolio yourself? I'm wondering if you have found a practical (more passive) way to implement the "long volatility" and the "commodity trend" part of the portfolio?
The long vol/tail is tough bc it seems like the better managers are going to be in an LP. Mutiny Fund offers accesss to a diversified basket of Long Vol managers and the minimum is 100k. If you don't want to go down that route, the TAIL etf is a simple proxy. Pure commodity trend could be done through LCSIX. If you want more diversified trend-following, I'd look at managed futures. AHLIX is a blue chip CTA.

My personal portfolio is vanguard ETFs (about 60 us/20 dev europe/20 dev asia) and half managed futures. Although the individual parts are volatile, the low correlation makes the portfolio less volatile. I was trying to convey that by saying "blend together a bunch of uncorrelated and unpopular investments".
rich126
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Re: Strategies for seeking 3-4% return at minimal risk?

Post by rich126 »

antman50 wrote: Fri Oct 09, 2020 12:15 pm
bedon wrote: Thu Oct 08, 2020 11:41 pm
antman50 wrote: Thu Oct 08, 2020 12:28 pm One way to do so is to blend together a number of uncorrelated and unpopular investments but it doesn't sound like that's what you're looking to do.

https://docsend.com/view/taygkbn

TLDR : 20% Stocks, 20% Govt Bonds, 20% Longvol/TAIL, 20% Commodity Trend, 20% Gold
Have you implemented the "dragon" portfolio yourself? I'm wondering if you have found a practical (more passive) way to implement the "long volatility" and the "commodity trend" part of the portfolio?
The long vol/tail is tough bc it seems like the better managers are going to be in an LP. Mutiny Fund offers accesss to a diversified basket of Long Vol managers and the minimum is 100k. If you don't want to go down that route, the TAIL etf is a simple proxy. Pure commodity trend could be done through LCSIX. If you want more diversified trend-following, I'd look at managed futures. AHLIX is a blue chip CTA.

My personal portfolio is vanguard ETFs (about 60 us/20 dev europe/20 dev asia) and half managed futures. Although the individual parts are volatile, the low correlation makes the portfolio less volatile. I was trying to convey that by saying "blend together a bunch of uncorrelated and unpopular investments".
Usually I have a good instinct on things but in this case I was in left field. When I saw the commodity fund above (LCSIX) I did a quick search on it and went to Morningstar where I figured it would have no rating or at best a 3 star rating. Egg on my face, it actually has the top (5 star) rating. Learn something new every day. Not saying anyone should invest in it, but you learn something new every day or so.
antman50
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Re: Strategies for seeking 3-4% return at minimal risk?

Post by antman50 »

Keep in mind that morningstar is backward-looking and doesn't always categorize funds the right way. That fund is in the managed futures category (which has struggled over the past few years). Since it is commodities only, it's going to be much different than most of the other managed futures managers. Sometimes that means it will have better performance, sometimes that will make them look like dummies. In the context of the dragon portfolio and trying to mirror the "Commodity Trend" component, it's about as a good as you can do. If that fund had 2 stars, I would say that it fits the sleeve bc the dragon portfolio is not about picking the best manager... It's about assembling his version of reliable betas that perform well in different environments for different reasons.
patrick
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Location: Mega-City One

Re: Strategies for seeking 3-4% return at minimal risk?

Post by patrick »

You can open a couple of FDIC insured bank accounts to get 3% interest on up to $115,000 of your money:

HMBradley pays 3% on balances up to $100,000 in checking accounts. They require direct deposit every month (payroll or government benefits) and saving at least 20% of deposits (i.e. total withdrawals no more than 80 percent of total deposits), evaluated quarterly.

Porte Bank pays 3% on balances up to $15,000 in savings accounts. They require $1000 of deposits in a month (an ACH push from another of your own accounts seems to qualify) to open the account.
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anon_investor
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Re: Strategies for seeking 3-4% return at minimal risk?

Post by anon_investor »

protagonist wrote: Fri Oct 09, 2020 12:06 pm
KingRiggs wrote: Fri Oct 09, 2020 12:01 pm
protagonist wrote: Fri Oct 09, 2020 11:56 am
anon_investor wrote: Fri Oct 09, 2020 12:15 am
tibbitts wrote: Thu Oct 08, 2020 8:51 pm
Where are you getting those returns on a MM account?
+1, where can I find a MM account with those returns? Sign me up.
https://www.kfcu.org/himma-plus/ Around 1.4% APY last I checked.
It's 0.45%, with a 1% bonus for six months...not exactly what you were touting...
You don't have to maintain the balance for 6 months. My understanding (acc. to a rep) is that it is a compound rate of 1% over what they offer in their regular HIMMA, not a "bonus" you receive at the end. The regular HIMMA is getting around 0.4%. After 6 months your HIMMA Plus acct. will be downgraded to a regular HIMMA. But acc. to the same rep., after 6 months, if you close the account you can re-open with a new HIMMA Plus as "new money".

Hopefully this info was accurate.

https://www.kfcu.org/rates/

High Interest Money Market (HIMMA) Plus
Opening Balance2

Rate1

APY3

1Promotional rate will revert to standard HIMMA rate after the term.
2New money only. $2,500 minimum to open account and to earn dividends.
3Annual Percentage Yield.

$2,500.00 - $9,999.99

1.34%

1.35%

$10,000.00 - $49,000.99

1.34%

1.35%

$50,000.00 - $99,000.99

1.39%

1.40%

Balances $100,000.00 and above

1.44%

1.45%
Interesting, thanks for shoring, some people might be willing to do that work. Personally, too much work for me. I maxed out I Bonds in April, so getting equivalent of 1.74% for 12 months (but this is better than any taxable account because the interest is tax deferred and exempt from state income tax). I have CDs currently earning 1.35%-1.85% that will expire next year and I will move those funds to I Bonds too.
protagonist
Posts: 6822
Joined: Sun Dec 26, 2010 12:47 pm

Re: Strategies for seeking 3-4% return at minimal risk?

Post by protagonist »

anon_investor wrote: Fri Oct 09, 2020 1:35 pm
protagonist wrote: Fri Oct 09, 2020 12:06 pm
KingRiggs wrote: Fri Oct 09, 2020 12:01 pm
protagonist wrote: Fri Oct 09, 2020 11:56 am
anon_investor wrote: Fri Oct 09, 2020 12:15 am

+1, where can I find a MM account with those returns? Sign me up.
https://www.kfcu.org/himma-plus/ Around 1.4% APY last I checked.
It's 0.45%, with a 1% bonus for six months...not exactly what you were touting...
You don't have to maintain the balance for 6 months. My understanding (acc. to a rep) is that it is a compound rate of 1% over what they offer in their regular HIMMA, not a "bonus" you receive at the end. The regular HIMMA is getting around 0.4%. After 6 months your HIMMA Plus acct. will be downgraded to a regular HIMMA. But acc. to the same rep., after 6 months, if you close the account you can re-open with a new HIMMA Plus as "new money".

Hopefully this info was accurate.

https://www.kfcu.org/rates/

High Interest Money Market (HIMMA) Plus
Opening Balance2

Rate1

APY3

1Promotional rate will revert to standard HIMMA rate after the term.
2New money only. $2,500 minimum to open account and to earn dividends.
3Annual Percentage Yield.

$2,500.00 - $9,999.99

1.34%

1.35%

$10,000.00 - $49,000.99

1.34%

1.35%

$50,000.00 - $99,000.99

1.39%

1.40%

Balances $100,000.00 and above

1.44%

1.45%
Interesting, thanks for shoring, some people might be willing to do that work. Personally, too much work for me. I maxed out I Bonds in April, so getting equivalent of 1.74% for 12 months (but this is better than any taxable account because the interest is tax deferred and exempt from state income tax). I have CDs currently earning 1.35%-1.85% that will expire next year and I will move those funds to I Bonds too.
Ever since I found out about them I have argued that I-bonds are the best investment for fixed income, esp. for retirees. I max out on I-bonds every year regardless of the rate. Pity the investment limits are so small or I would probably just dump all of my fixed income investments in them and not have to think about them for the rest of my life.
texasfight
Posts: 90
Joined: Mon Jul 27, 2020 3:12 pm

Re: Strategies for seeking 3-4% return at minimal risk?

Post by texasfight »

20% VTI
80% VGIT
User avatar
goingup
Posts: 3972
Joined: Tue Jan 26, 2010 1:02 pm

Re: Strategies for seeking 3-4% return at minimal risk?

Post by goingup »

Rocky_Mtn_Expat wrote: Thu Oct 08, 2020 12:18 pm While we don't have an immediate use for it, I am somewhat sensitive to erosion of principal and market volatility, so I don't want to do anything risky with it.
Of course, everyone has different goals and priorities for their money. That said, I think many of us would invest money in a taxable account according to our asset allocation plan. Many investors would take that $200K and put it in a Total Market Index fund because that's a tax-efficient fund for a taxable account. To balance, they'd probably add more bonds to a tax-deferred account (401K, IRA). Depending on your tax bracket, you could also look at tax-managed balanced 60/40 fund.

Personally, I wouldn't segregate a lump of money and seek a specific return for it. Things just don't work out like that unless you're purchasing a CD (none of which has returned 3-4% recently).

Invest your $200K for the long-term unless you have a different idea for the funds. If the market craters you can tax loss harvest the loss. Trying to eke out a specific return from a segregated pot of money seems is likely to cause behavioral errors.
carminered2019
Posts: 839
Joined: Fri Jun 21, 2019 7:06 pm

Re: Strategies for seeking 3-4% return at minimal risk?

Post by carminered2019 »

if you have a mortgage then pay it off. 3% guarantee return with zero risk.
User avatar
CardinalRule
Posts: 531
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Location: United States

Re: Strategies for seeking 3-4% return at minimal risk?

Post by CardinalRule »

The online WSJ has an article, “Your Cash Earns Zip, Zilch, Nada. Don’t Make It Worse.”

It notes that “stock in electric utilities, banks and other financial companies, real-estate investment trusts or master limited partnerships in the energy industry” offer yields that are 4% and higher. But these investments have been hammered this year, even when income is considered.
bedon
Posts: 6
Joined: Mon Oct 05, 2020 10:18 pm

Re: Strategies for seeking 3-4% return at minimal risk?

Post by bedon »

antman50 wrote: Thu Oct 08, 2020 12:28 pm
The long vol/tail is tough bc it seems like the better managers are going to be in an LP. Mutiny Fund offers accesss to a diversified basket of Long Vol managers and the minimum is 100k. If you don't want to go down that route, the TAIL etf is a simple proxy. Pure commodity trend could be done through LCSIX. If you want more diversified trend-following, I'd look at managed futures. AHLIX is a blue chip CTA.

My personal portfolio is vanguard ETFs (about 60 us/20 dev europe/20 dev asia) and half managed futures. Although the individual parts are volatile, the low correlation makes the portfolio less volatile. I was trying to convey that by saying "blend together a bunch of uncorrelated and unpopular investments".
Thank you so much for that detailed reply - that was very helpful.

Since TAIL is 95% long term treasuries, how does this affect the bond section of the portfolio, should we maybe reduce the bond fraction of the portfolio (so we are not overweight bonds) or we approach this as a completely different asset class?
Regarding the LCSIX, it looks like exactly the CTA competent of the dragon portfolio should be (correlation with stocks is 0.05) and performance is pretty good. The only thing is that the expenses are a bit high :)
Since you have multiple uncorrected assets, I guess rebalancing is important... How often do you rebalance your portfolio?
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