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Adjusting Your 60/40 Portfolio For A Zero Yield World

Published Fri, 13 Nov 2020 07:00:00 -0500 on Seeking Alpha

Seeking AlphaPortfolio StrategyAdjusting Your 60/40 Portfolio For A Zero Yield WorldNov. 13, 2020 7:00 AM ET|| Includes: AIF, BGB, BIMBX, BTZ, FLC, FPF, GOVT, HYI, MBB, PDI, TLTby: Alpha Gen CapitalAlpha Gen Capital Yield Hunting: Alt Inc OppsSafe 8+% Income Stream using CEFs, ETFs, Munis, Preferreds, and REITs.SummaryIf you continue to use a 60/40 portfolio then you will likely be disappointed with your returns for the next five to 10 years.
We are entering a new paradigm that will either need you to accept lower returns or do something different.
In this report, we look at what different things one can be doing to improve the risk-return trade off in your portfolio.
(This report was issued to members of Yield Hunting on Oct. 28. All data herein is from that date or prior.)
This will be a multi-part series on fixing portfolios for baby boomers as we enter a new paradigm.
I spend a lot of my time reading journals and white papers on retirement income planning. This is a quick evolving area of research since just as recently as 12 years ago, you didn't do need to do much "planning." In 2007, the six-month certificate of deposit ("CD") earned you nearly 5.50%. Hard to fathom today, isn't it? It was very easy to produce income and for a retiree to replicate the paycheck. Today, not so much.
The 4% rule by William Bengen came out nearly three decades ago and continues to be misunderstood. I have received countless questions regarding it. They primarily go like this: "If I get an average of 4.1% annual return and my withdrawal rate is 4.0%, then my total liquid assets ("TLA") will never go down, right?"
Wrong!
The 4% rule adjusts the withdrawal rate for inflation. So you need to generate an average annual return of the withdrawal rate plus inflation. If you assume a 4% withdrawal rate and 2% for inflation, then your portfolio must generate 6% or more for it not to start to go down.
Generating a 6% return today is difficult. And the math continues... Read more

Stock name Last trade   P/E Earnings/Share Dividend/Share Dividend yield
HIGH YIELD INCOME FUND 15.21   0.0 0.00 0.00 7.00
FLAHERTY & CRUMRINE/CLAYMORE TOTAL RETURN FUND 21.51   0.0 0.00 0.00 6.34
BLACKROCK CREDIT ALLOCATION INCOME TRUST IV 13.75   0.0 0.00 0.00 5.82

HIGH YIELD INCOME FUND - HYI
HIGH YIELD INCOME FUND - HYI  


Older articles featuring High Yield Income Fund (HYI):
How To Strengthen High-Yield Allocations With Term CEFs
Sifting Through The Rubble Of The High Yield Sector
ISD: Attractive 8%+ Yielding CEF
Postmortem On 13%-Yielding ACP: Don't Just Look At The Yield
Weekly Update: 43 Dividend Hikes Declared November 25
A Quick Look At Some High-Yielding CEFs With >100% Distribution Coverage
Seeking Income In High Yield Bonds
Weekly Review: High-Yield CEFs - This Fund Is Traded At Almost 16% Discount
Weekly Review: High-Yield CEFs - The Fund With The Highest Coverage Ratio Deserves Attention
Stable Yield With Closed-End Funds: Term CEF Ladder

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