Though I am no longer managing a mutual fund portfolio, I continue to enjoy opining about investing through writing this blog. I hope readers find it useful in making investment decisions, whether as professional investors or as amateur investors trying to grow--and protect--one's own portfolio.
This was a year when putting a portfolio in a stocks and bonds using index funds would have produced an excellent risk-adjusted return. I expect that next year will not be so straightforward and that such an approach will yield much more modest returns.
Bonds have continued to produce amazing returns (except for U.S. Treasuries, finally). High-yield bonds (actually more like equities than fixed income) and other corporate bonds have been excellent investments in recent years. The need for investment income has pushed yields to such low levels that further declines in interest rates (which produce capital appreciation in bond portfolios) seem unlikely.
Despite the likelihood of a modest increase in tax rates on corporate dividends, there still are a number of high-quality stocks that have dividend yields that are higher than those on U.S. Government bonds (and shorter-term corporate bonds). I still think the attractive starting dividend yields and likely dividend increases are attractive for investors who need some income from their investments.
After sharp gains in stock markets over the past six months--and even sharper gains over the past four years--I advocate holding some cash on hand for selloffs (and potential buying opportunities) that may arise.
Best wishes for a healthy, happy, and prosperous New Year!
S & P 500: 1405