Quote:
Originally Posted by bdahlg68
Maybe this goes beyond 102, but one thing which might be a good topic to discuss is INFLATION! Just read this article and thought it might be a good discussion point for this forum and how to consider this in diversifying your portfolio, or where "parking" you money may change over time.
http://moneymorning.com/2012/02/16/i...-on-inflation/ |
Brian ---
GREAT POINT!
This is where a guy could launch into a discussion about bonds vs securities (stocks) and GROWTH vs Income stream.
I just mentioned in the above post that I have a Muni bond portfolio (about 30% of my investable assets).... So here's a good point to discuss. This account -- should interest rates remain "stable" will spin off income (4% ish) but will basically have zero growth in CAPITAL. The bonds will mature at their maturity dates and I'll just get my money back....
BUT... that is ASSuming that I "hold" the bonds to maturity. Which I plan to do. I'm only laddered out 5 years - as of last year - so to 2018. Each year beginning this year (2012) I will have one 5th of that account "mature" - we will then use that cash to buy bonds that that mature in 2019 and so on.
Here's the problem with that.... you have no growth in capital - and if I can "only" make 4% interest (tax free) and inflation is running at 3%.... I'm really falling behind.
What I've done personally is to keep a larger majority of my investable assets in securities which - if I do it right - will keep me even or better than the inflation rate. That's the "TOTAL RETURN" that I keep banging on. If you don't have that -- you're going to be falling behind more and more every year. That the BALANCE we've discussed.
My balance is - some safety (at my age) - in return for a tax free dividend/interest income stream... while taking more "risk" in the stock market... and attempting to get a higher TAXABLE dividend stream from those investments.
If you're in a ROTH / 401K etc... this is kind of a mute point - because you won't have the tax issues ("yet" -- remember the 401 is only "deferred") and you won't have any taxable event with the ROTH.
If you're reinvesting the dividends from your stocks... and you have growth in the capital (total return) you should be "okay"