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390
stfu
2025 Dec 25, 4:24am
AD says
And that's my problem with bonds. Taking your numbers that's a real return of .5% vs. S&P real return of over 8% over last 20 years.
Further, at a yield of 3.2% and a typical cash flow requirement of $100k per year for a retired couple (feel free to disagree with that but to me that's just basic living ex-CA) that would mean you need a nest egg of $3,125,000 in order to live off the interest. I'm guessing that less than 4% of retirees have that much of a nest egg.
To illustrate - If I put that same nest egg money into something like SPYD or SCHD I'll get that $100,000 (or more) in dividends and still have a decent chance at another $200,000 in capital gains. I might also have a capital loss of $200,000 but as long as I don't realize those losses my dividends shouldn't change by that much. Over time the odds are with me.
In my investing lifetime (last 35 years) bonds have never made sense. They are considered "low risk" because they have low volatility. This is straight out of the MBA curriculum where they define risk as volatility when they are calculating their debt to equity ratios. That's not my definition of risk. Risk should be defined as not keeping ahead of the cost of living.
It has returned about 3.2% annually since its inception in April 2007 versus annual inflation averaging around 2.7% since April 2007
And that's my problem with bonds. Taking your numbers that's a real return of .5% vs. S&P real return of over 8% over last 20 years.
Further, at a yield of 3.2% and a typical cash flow requirement of $100k per year for a retired couple (feel free to disagree with that but to me that's just basic living ex-CA) that would mean you need a nest egg of $3,125,000 in order to live off the interest. I'm guessing that less than 4% of retirees have that much of a nest egg.
To illustrate - If I put that same nest egg money into something like SPYD or SCHD I'll get that $100,000 (or more) in dividends and still have a decent chance at another $200,000 in capital gains. I might also have a capital loss of $200,000 but as long as I don't realize those losses my dividends shouldn't change by that much. Over time the odds are with me.
In my investing lifetime (last 35 years) bonds have never made sense. They are considered "low risk" because they have low volatility. This is straight out of the MBA curriculum where they define risk as volatility when they are calculating their debt to equity ratios. That's not my definition of risk. Risk should be defined as not keeping ahead of the cost of living.
391
clambo
2025 Dec 25, 8:41am
The previous post is correct.
Over time, bonds pay interest; periods of capital appreciation are followed by periods of depreciation. The long term result is the interest.
I'm retired and have a 90% stock allocation. In time, I'll convert some funds within IRAs, or similar to more dividend paying stocks, unless I'm lazy and keep doing almost nothing.
Over time, bonds pay interest; periods of capital appreciation are followed by periods of depreciation. The long term result is the interest.
I'm retired and have a 90% stock allocation. In time, I'll convert some funds within IRAs, or similar to more dividend paying stocks, unless I'm lazy and keep doing almost nothing.
392
AD
2025 Dec 25, 10:48am
AD
2025 Dec 25, 10:48am
stfu says
Yep.
The risk premium for an investment is the return an investor expects to receive above the return of a "risk-free" asset (like U.S. Treasury bonds) as compensation for taking on additional risk. It's a theoretical concept that constantly changes.
One analysis in March 2025 noted that VYM's risk premium was still near a 10-year peak relative to Treasury rates, suggesting an attractive potential return for the inherent risk at that time.
The fund's current SEC yield is approximately 2.42%. The difference between this yield and the current yield of a risk-free asset (e.g., a 10-year Treasury note) can provide a rough, current-market estimate of the yield premium, but this is not the total risk premium (which also includes capital appreciation expectations.)
In my investing lifetime (last 35 years) bonds have never made sense. They are considered "low risk" because they have low volatility. This is straight out of the MBA curriculum where they define risk as volatility when they are calculating their debt to equity ratios. That's not my definition of risk. Risk should be defined as not keeping ahead of the cost of living.
Yep.
The risk premium for an investment is the return an investor expects to receive above the return of a "risk-free" asset (like U.S. Treasury bonds) as compensation for taking on additional risk. It's a theoretical concept that constantly changes.
One analysis in March 2025 noted that VYM's risk premium was still near a 10-year peak relative to Treasury rates, suggesting an attractive potential return for the inherent risk at that time.
The fund's current SEC yield is approximately 2.42%. The difference between this yield and the current yield of a risk-free asset (e.g., a 10-year Treasury note) can provide a rough, current-market estimate of the yield premium, but this is not the total risk premium (which also includes capital appreciation expectations.)
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One year return = 24.38%
If you invested $1 million in the average S&P 500 stock index fund, you'd be smoking fat cigars and doing $243,800 worth of hookers and coke.