Author Archive: Brett Owens

A half-million dollars is a lot of money. Unfortunately, it won’t generate much income today if you limit yourself to popular investments.

The 10-year Treasury has “rallied” to 1.85%. Put your $500K in them and you’re well below the single-person poverty level at $9,250 annually. Yikes.

Dividend paying stocks are masquerading around as bond proxies for this reason. But they still don’t yield enough. Vanguard’s popular Dividend Appreciation ETF (VIG) pays 2.1%. The iShares Select Dividend ETF (DVY) pays 3.2% – better, but that’s still just below the poverty level for two people at $16,000 per year.

When investment income falls short, retirees sell their investments to supplement the income.… Read more

Real estate investment trusts (REITs) are an important component of a high yield portfolio for retirees or aspiring retirees. But there is one group of exotic, tantalizing REITs that must be avoided: mortgage REITs. Especially today.

These so-called mREITs often offer high dividend yields—as high as 14% in some cases! That alone should tell you something is amiss. Unfortunately many investors get seduced by these short-term income streams, leading them straight into the arms of disaster.

What’s so bad about mREITs? Plenty, really. Let’s start with the income issue. mREITs are notorious for having uneven payouts, which means you cannot expect the next dividend to be higher or even the same as the one from last quarter or last month.… Read more

The Wall Street Journal reports – yet again – that stock picking is dead. We’re being told that passive index funds outperform actively managed funds over the long term, and smart investors should choose passive because actively beating the market isn’t possible.

On one level, this is true. If your plan is just to buy and hold for 30 years or more, and if you don’t need any income right now, you are probably better off with a low-cost index fund than a higher-cost actively managed fund. But what if need income NOW? Then the “wisdom” of passive investing isn’t so great, and you need to consider alternatives.… Read more

There’s a lot of buzz about beta these days. Should we contrary-minded investors fade the fad?

Beta is industry slang for volatility. It’s generally used when judging a particular investment or portfolio with respect to the broader market, with 1.0 as the benchmark. Lower is better, as that (in theory) means the issue is less volatile than the market.

For example, Campbell Soup (CPB) has a listed beta of just 0.37 – which (again, in theory) means CPB shares are 63% less volatile than the overall market. If the S&P drops 2% in a day, CPB shares should hold steadier and lose less than 1% or so.… Read more

It’s an old investing saw that should have been taken out behind the barn years ago.

You’ve no doubt heard it before: “As you get closer to retirement, you should shift out of stocks and into fixed-income investments.”

You’ll often hear it in combination with some arbitrary rule, like: “The percentage of your portfolio devoted to stocks should be 100 minus your age.”

An Overblown Fear

On the surface, it seems like sound advice, right?

After all, CDs, Treasuries and the like guarantee your principal, and stocks don’t.

But it’s based on a dangerous misconception: that “guaranteed principal” and “no risk” are the same thing.… Read more