Bubble watch: dividend paying stocks

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Bubble watch: dividend paying stocks

Post by animule » Thu May 02, 2013 10:10 pm

When the investment world is so enamored of dividend paying stocks to the point that bond funds actually ditch bonds to hold them, then maybe all this talk of a 'bond bubble" is misplaced and maybe the real bubble is in dividend paying stocks.

"Bond Funds Running Low on... Bonds"

http://online.wsj.com/article/SB1000142 ... 44212.html
The number of bond funds that own stocks has surged to its highest point in at least 18 years, another sign that typically conservative investors are taking bigger risks to boost returns.
The $21 million Forward Income Builder fund, run by Forward Management LLC in San Francisco, had almost no money in stocks at the middle of last year, according to Morningstar. As of the end of February, it had nearly 49% invested in stocks.
This reminds me of the situation back in 1999 when "growth" mutual funds suddently morphed into technology funds. It seems like all of them owned the same few stocks - JDS Uniphase, Cisco Systems, Lucent Technologies, etc. I remember that people were shocked when their growth funds tanked like tech funds did.

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Re: Bubble watch: dividend paying stocks

Post by Grt2bOutdoors » Thu May 02, 2013 11:11 pm

Ignore the noise. It's one thing when you have equities trading at 40x earnings when they are growing 2% a year and borrowing to make the dividend, it's quite another when the stock trades at a slightly higher market multiple, earns the dividend plus and is a solid company.
If you own the Total Stk Market - guess what, you also have an ownership position in those same dividend paying equities. Ignore the noise and stay the course - whatever that may be in your IPS. You do have an IPS?
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions

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