Published Mon, 16 Apr 2018 10:00:00 -0400 on Seeking Alpha
Our Core Portfolio has the goal of generating income for retirees or being the fixed income sleeve for accumulators. On the former we have highlighted on several occasions the predicament income investors and retirees are in today amid near record low interest rates. Previous retirees could invest in 6-month CDs as recently as 12 years ago and earn 5.50%. It's hard to imagine that today. In comparison, 5-year corporate bonds currently yield just 3.75% with significantly more credit risk than a 6-month CD.
Retirees are currently weighing the dilemma of investing more in stocks, despite the 9-year bull run and moderately high valuations or accepting low interest rates that are below their hurdle rates (required rates of returns to make their financial plans work). Most financial plans depend on their portfolios reaching a certain annual rate of return target. Forward estimates for portfolio rates of returns will likely be met over a long time horizon (10-30 years) but we have a large cohort of baby boomers at or near retirement today that are facing the largest risk in today's market: sequence of returns risk.
Sequence of returns risk is the initiation of drawing on your portfolio and then experiencing a large decline in portfolio value early in your retirement years. When withdrawing from an investment portfolio the impact is an increase in portfolio volatility. Think of retiring in 2007 and the next year seeing your retirement nest egg decline by 25-35% or more. At... Read more
|Stock name||Last trade||P/E||Earnings/Share||Dividend/Share||Dividend yield|
|SPDR S&P 500 ETF||271.65||0.0||0.00||4.80||1.73|
|ISHARES BARCLAYS AGGREGATE BOND FUND|
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