Why not aim for a HIGH YIELDING portfolio?

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firebirdparts
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Re: Why not aim for a HIGH YIELDING portfolio?

Post by firebirdparts »

If that was a troll post, it seems to have worked out.
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Carol88888
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Re: Why not aim for a HIGH YIELDING portfolio?

Post by Carol88888 »

There is a very thoughtful article on Seekingalpha.com by Jim Sloan entitled "What if you need income from your retirement investments but want growth too?"

He provides a sound framework for analyzing what yields are reasonable given the environment we are currently in.

One excerpt: "Market historians looking back on the past decade will likely write a chapter entitled 'The Great Yield Chase.' We see it almost everyday in articles right here on SA (Seeking Alpha) touting astonishing yields as high as 10% or more. I occasionally glance at those articles but more often than not just roll my eyes and think of ads for amazing diets, youth elixirs and reversal of hair loss."
RAchip
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Re: Why not aim for a HIGH YIELDING portfolio?

Post by RAchip »

“The price of a stock is set by the market as the aggregate PV of future cash flows from that stock.“

The market price is not “set” by a dcf valuation. The market price is the price people are willing to buy/sell for at any given time. It fluctuates from day to day and often from trade to trade. A dcf is what professor says he market price should be but that valuation is extremely speculative and 2 reasonable professors can come up with wildly different dcf valuations for the same stock.

Why is Beyond Meat’s market value over $10 billion? There is no formula that determines what market price is. If a company has a little more or a little leas cash that may or may not have any on market price. If a company does not pay a dividend and accumulates cash the market may or may not ascribe any value to that cash.
RAchip
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Re: Why not aim for a HIGH YIELDING portfolio?

Post by RAchip »

“The price of a stock is set by the market as the aggregate PV of future cash flows from that stock.“

The market price is not “set” by a dcf valuation. The market price is the price people are willing to buy/sell for at any given time. It fluctuates from day to day and often from trade to trade. A dcf is what professor says he market price should be but that valuation is extremely speculative and 2 reasonable professors can come up with wildly different dcf valuations for the same stock.

Why is Beyond Meat’s market value over $10 billion? There is no formula that determines what market price is. If a company has a little more or a little leas cash that may or may not have any on market price. If a company does not pay a dividend and accumulates cash the market may or may not ascribe any value to that cash.
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vineviz
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Re: Why not aim for a HIGH YIELDING portfolio?

Post by vineviz »

RAchip wrote: Tue Jul 30, 2019 1:58 pm “The price of a stock is set by the market as the aggregate PV of future cash flows from that stock.“

The market price is not “set” by a dcf valuation. The market price is the price people are willing to buy/sell for at any given time.
The "price people are willing to buy/sell for" equals what the market says the "aggregate PV of future cash flows" is. They are the same thing.
"Far more money has been lost by investors preparing for corrections than has been lost in corrections themselves." ~~ Peter Lynch
pdavi21
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Re: Why not aim for a HIGH YIELDING portfolio?

Post by pdavi21 »

Pros:
1. Probably nothing
2. High dividend payers represent some of the companies capable of paying a high dividend. Thus, they are all currently capable of paying a high dividend while there are some companies who don't but can and some who don't and can't. If, for some reason, the ability to pay high dividends is not "priced-in" to high dividend stocks...maybe they are likely to perform better in some way for you.

Cons:
1. Dividends aren't necessarily better than stock buybacks, business investment, R&D, asset investment, debt reduction, cash hoarding, etc.
2. Higher tax in taxable account
3. Lower portfolio diversification
"We spend a great deal of time studying history, which, let's face it, is mostly the history of stupidity." -Stephen Hawking
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firebirdparts
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Re: Why not aim for a HIGH YIELDING portfolio?

Post by firebirdparts »

I admit some stock pricing is magic, but high dividends are not magic. They're dull.

If a company lays the money out there, and nobody wants to pay much to acquire it, there's a very blatant reason that perfectly ordinary people have already figured out.

It only takes 1 person to buy a company, but it takes 7 billion people working together to not buy it.
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patrick013
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Re: Why not aim for a HIGH YIELDING portfolio?

Post by patrick013 »

JimmyJammy wrote: Mon Jul 29, 2019 9:37 am
Of course, you'd need to load up on high-yielding stocks and other high-yield assets that are reasonably safe/reliable. Don't a lot of retirees or near-retirees do that kind of thing?

What are the pros and cons?

If I had any money to invest I'd look at ticker SPYD. Volume is up, AUM has doubled, yield is 4.5%, all stocks are in the 500...not mortgage REITs or gas MLP's.

It's your decision. ST-Interm bonds are safer but if you believe rates will stay low try VG ticker VCLT for corp bonds.

Both are investment grade but I'd tilt SPYD but not as high as TSM. Some people believe the 500 will see the 3500 level in several years but that has to be seen to be believed as well.

Sometimes income and cap gains can provide ample cash for retirement and other times withdrawals are made at set percentages (see wiki) to budget cash needs during retirement. A monte carlo (see wiki) calc can be helpful there as well.
age in bonds, buy-and-hold, 10 year business cycle
RAchip
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Re: Why not aim for a HIGH YIELDING portfolio?

Post by RAchip »

vineviz wrote: Tue Jul 30, 2019 3:10 pm
RAchip wrote: Tue Jul 30, 2019 1:58 pm “The price of a stock is set by the market as the aggregate PV of future cash flows from that stock.“

The market price is not “set” by a dcf valuation. The market price is the price people are willing to buy/sell for at any given time.
The "price people are willing to buy/sell for" equals what the market says the "aggregate PV of future cash flows" is. They are the same thing.
I disagree. Many people buy stock because they think the market price is below what the stock is actually worth. The seller in that transaction likely believes the opposite. Others buy without any consideration of value. For example, an index fund buys shares in its index when money comes in regardless of the market price of the shares.
naha66
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Re: Why not aim for a HIGH YIELDING portfolio?

Post by naha66 »

JimmyJammy wrote: Mon Jul 29, 2019 9:37 am Isn't there a case to be made to construct a portfolio that has a higher yield than what index funds pay?

VTSAX pays only 1.84%.

If I wanted an annual income of $80,000 I'd need $4.2 million in a portfolio yielding 1.9%. But you'd only need $842,105 from a portfolio yielding 9.5%.

Of course, you'd need to load up on high-yielding stocks and other high-yield assets that are reasonably safe/reliable. Don't a lot of retirees or near-retirees do that kind of thing?

What are the pros and cons?

You have been reading Rida and his crony's on seeking alpha.

https://seekingalpha.com/article/427855 ... eed-retire
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vineviz
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Re: Why not aim for a HIGH YIELDING portfolio?

Post by vineviz »

RAchip wrote: Tue Jul 30, 2019 9:03 pm
vineviz wrote: Tue Jul 30, 2019 3:10 pm
RAchip wrote: Tue Jul 30, 2019 1:58 pm “The price of a stock is set by the market as the aggregate PV of future cash flows from that stock.“

The market price is not “set” by a dcf valuation. The market price is the price people are willing to buy/sell for at any given time.
The "price people are willing to buy/sell for" equals what the market says the "aggregate PV of future cash flows" is. They are the same thing.
I disagree. Many people buy stock because they think the market price is below what the stock is actually worth. The seller in that transaction likely believes the opposite. Others buy without any consideration of value. For example, an index fund buys shares in its index when money comes in regardless of the market price of the shares.
Except that you’re not disagreeing with what I said: you’re elaborating on why what I said is true.

The interaction of buyers and sellers is what sets the market price.
"Far more money has been lost by investors preparing for corrections than has been lost in corrections themselves." ~~ Peter Lynch
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