Investing Strategies: Regular Stocks vs. Vanguard

[JayDogSmooth]

I was speaking to a buddy and he prefers to have about 10 well known stocks (GM, Coke, Target, Wal-Mart, etc.) that pay dividends. He has about 200 k invested, and said he gets about 700 per month of dividends. Nothing mentioned about ROI percentages.

I have about 10 Vanguard funds (mix of ETF's and mutual funds), roughly 75 / 25 split in Domestic vs. Specialty. 2 Large Cap, 2 Medium, 2 Small Cap for Domestic and 2 Specialty. I don't have as much invested as he does, but have noticed similar dividends and the ROI percentages have been decent.

What does everyone prefer, his method or mine? Or a mixture of both? I do the DRIP method of reinvesting as I'm in sales and can't monitor the market all day and he takes the cash, what do you guys think? He's also about 30 % invested in International Markets, while I'm 15 % invested in International. Note, he's more of a risk taker and I'm more conservative. We're both 35 with 2 kids and hope to retire by 65, any help would be greatly appreciated!

 

[Upstream]

I am more aligned to your strategy of a diversified mix of funds as a long-term investment strategy. The diversification helps reduce risk, which should appeal to you since you indicated that you are a bit risk adverse. And since you indicated that you don't have the time/inclination to monitor the market, it saves you the effort of researching individual stocks.

I supplement my stock funds with bond funds (which become a bigger part of my portfolio as I age), and also some individual stocks for companies I have an interest in.

 

[RBS05]

It's whatever strategy works best for you and based on what you've said, you're not going to want to pick individual stocks. Maybe add a couple separate from your funds in companies you believe in long term. Not to mention you likely have some exposure to those kinds of companies already.

Keep on investing what you can, reinvest dividends, leave it alone and you'll be good to go.

 

[RU Cheese]

Do some research on your own to learn about investing and don't rely on a football message board.

 

[e5fdny]

Do some research on your own to learn about investing and don't rely on a football message board.

How about cheese quotes? Any good recommendations?

As to the OP's question I do something similar to what @Upstream and @RBS05 do with regard to my retirement stuff (pension, 401k, 457, annuity). IMO at just 35 maybe you should be a little bolder. You though have to decide that for yourself.

But with my own portfolio (that I am not planning to live off of when I retire) I have a bunch of blue chips and companies I like and just reinvest the dividends.

 

[RUBigFrank]

mix of index investing, fixed income via GIF, and actively managed funds

 

[SteveVA2]

OP ask your question at bogleheads.org

 

[OntheBanks]

In my IRA account I have 98% US stock ETFS.
IShares Core S&P 500 - 25%
IShares Core Small cap - 20%
IShares Core Mid cap - 20%
Fidelity NASDAQ - 13%
Vanguard Extended Market (Small & Mid Caps) - 10%
Vanguard Total Market (All Caps) - 10%

IShares Core Emerging Market 2%

I don't do bonds even at 70 years old.

I also have a Brokerage Account and a Roth IRA
where I have a mixture of these ETFs and 7-10% in some
individual stocks that I hope and pray they will someday
recover from the paper losses they have returned.

 

[eliminate2006]

In my IRA account I have 98% US stock ETFS.
IShares Core S&P 500 - 25%
IShares Core Small cap - 20%
IShares Core Mid cap - 20%
Fidelity NASDAQ - 13%
Vanguard Extended Market (Small & Mid Caps) - 10%
Vanguard Total Market (All Caps) - 10%

IShares Core Emerging Market 2%

I don't do bonds even at 70 years old.

I also have a Brokerage Account and a Roth IRA
where I have a mixture of these ETFs and 7-10% in some
individual stocks that I hope and pray they will someday
recover from the paper losses they have returned.

Is there a reason for so much overlap? What do you see the NASDAQ fund doing for you? I am assuming your IRA is with Fidelity?

My US Equities is:
iShares Total US Stock Market
iShares Mid Cap
iShares Small Cap
iShares Micro Cap
Fidelity MSCI Real Estate

 

[T2Kplus10]

I am more aligned to your strategy of a diversified mix of funds as a long-term investment strategy. The diversification helps reduce risk, which should appeal to you since you indicated that you are a bit risk adverse. And since you indicated that you don't have the time/inclination to monitor the market, it saves you the effort of researching individual stocks.

I supplement my stock funds with bond funds (which become a bigger part of my portfolio as I age), and also some individual stocks for companies I have an interest in.

Me too, the Vanguard strategy works. I don't have the time, patience, or knowledge to pick individual stocks. Low cost, high diversification, sounds fine with me!

 

[T2Kplus10]

Is there a reason for so much overlap? What do you see the NASDAQ fund doing for you? I am assuming your IRA is with Fidelity?

My US Equities is:
iShares Total US Stock Market
iShares Mid Cap
iShares Small Cap
iShares Micro Cap
Fidelity MSCI Real Estate

What % do you have in Real Estate?

 

[ATIOH]

OP has an interesting history. Almost all his posts are thread staters, but he almost never comes back.

And to answer the question, your friend is lying to you about those numbers. They don't add up. Either that, or he's taking more risk than he's letting on.

 

[eliminate2006]

What % do you have in Real Estate?

US Equities (non-real estate) 70%
International equities 10%
Bonds 10%
Real Estate 5%
Cash 5%

I am seriously considering increasing international.
Edit: I plan on working for 31 more years.

 

[Raritan83]

As someone mentioned take a read of bogleheads. It more aligns with your strategy but is a good education.

I have migrated to the index funds. I have better uses of time than digging in to 10-Ks, cash flow statements, researching competitors, etc. If not looking at those you are essentially throwing darts. Might win. Might lose. Index investing I know my return will be the market's no dart throwing needed. I am good with that.

 

[ATIOH]

What type of bonds, and why so high if you plan on working for another 31 years?

 

[RUsince52]

No matter which way you go, I would consider adding The Greek Church to the portfolio. It will only go up and might buy real estate on the block as time goes on. It will always be an alternative to the lots. Plus a tax deduction write off as an offset. You are still young enough to make it work.

 

[eliminate2006]

What type of bonds, and why so high if you plan on working for another 31 years?

MUB in taxable, EMB and AGG in IRA.

I am looking for something with low correlation to US equities. I'm not sure that 10% bonds is high by more traditional standards from when yields were higher. I am also more small/mid cap tilted than most investors.

 

[phs73rc77gsm83]

OP has an interesting history. Almost all his posts are thread staters, but he almost never comes back.

And to answer the question, your friend is lying to you about those numbers. They don't add up. Either that, or he's taking more risk than he's letting on.

Agreed. The dividend claim is higher than 4%, of the 4 stocks he cited as an example only GM is 4%, the others are lower so I questioned the math too.

 

[ATIOH]

MUB in taxable, EMB and AGG in IRA.

I am looking for something with low correlation to US equities. I'm not sure that 10% bonds is high by more traditional standards from when yields were higher. I am also more small/mid cap tilted than most investors.

I like that mix of bond sectors for the portfolio you described. Active management is more successful in fixed income though, so you may want to consider transitioning out of the index funds.

It shouldn't affect your long term strategy, but something else to think about in the short term - the bond and stock market are highly correlated right now.

 

[MozRU]

OP has an interesting history. Almost all his posts are thread staters, but he almost never comes back.

And to answer the question, your friend is lying to you about those numbers. They don't add up. Either that, or he's taking more risk than he's letting on.

700 a month on 200k is only returning 4.2% a year. That is not enough return for the systematic risk he is taking on owning individual stocks.

Moz's stock port

Cigarette Stocks
One ETF: REM a REIT ylding 10%

I've owned cigarette stocks for years. You do the total return. I do watch this portfolio daily. Any technical signals that the trend has changed, I will dump it in seconds.

 

[Schmurg]

Set an asset allocation strategy. Buy the index funds to meet the strategy at Vanguard, Fidelity or Schwab. Check twice a year and re-balance according to your strategy. Don't over complicate it.

 

[RU1977]

My grandfather always said to invest in utilities.... Not sure why.

 

[eliminate2006]

I like that mix of bond sectors for the portfolio you described. Active management is more successful in fixed income though, so you may want to consider transitioning out of the index funds.

It shouldn't affect your long term strategy, but something else to think about in the short term - the bond and stock market are highly correlated right now.

Any suggestions for ETFs that are not correlated with US stocks?

 

[C0bra Kai]

Invest your money in SGYP, it will double by next Spring. Or invest it in RPRX and it will quadruple inside of two years. Nothing risked, nothing gained.

 

[Upstream]

My grandfather always said to invest in utilities.... Not sure why.

Utilities are what used to be known as widows and orphans stocks. They were low risk (since utilities were highly regulated and rarely went out of business, or at least that was the case years ago prior to deregulation), and they generated a lot of dividend income which widows and orphans could use to live off of.

 

[RU1977]

Utilities are what used to be known as widows and orphans stocks. They were low risk (since utilities were highly regulated and rarely went out of business, or at least that was the case years ago prior to deregulation), and they generated a lot of dividend income which widows and orphans could use to live off of.

I gues there aren't any widows and orphans stocks anymore? He retired a millionaire, but also had lots of other stocks that kept splitting over and over again....

 

[wheezer]

 

[RUJohnny99]

700 a month on 200k is only returning 4.2% a year. That is not enough return for the systematic risk he is taking on owning individual stocks.

Moz's stock port

Cigarette Stocks
One ETF: REM a REIT ylding 10%

I've owned cigarette stocks for years. You do the total return. I do watch this portfolio daily. Any technical signals that the trend has changed, I will dump it in seconds.

One of my first stocks was Philip Morris. Bought $3000 worth right before it split 3-1 in 1996 or 97. Reinvested every dividend and through spin offs I now have a diversified consumer staples portfolio worth $50,000 from it

ETFs don't give enough pop for me. I'd rather take my chances with 10-15 stocks. Some may tank, but one winner makes up for a lot of mistakes.

I tend to buy & forget about it. I'm looking at BCR in my port. I've owned for 12 years, have no idea what it does or why I bought it, but I've made 4x my money.

 

[MozRU]

One of my first stocks was Philip Morris. Bought $3000 worth right before it split 3-1 in 1996 or 97. Reinvested every dividend and through spin offs I now have a diversified consumer staples portfolio worth $50,000 from it

ETFs don't give enough pop for me. I'd rather take my chances with 10-15 stocks. Some may tank, but one winner makes up for a lot of mistakes.

I tend to buy & forget about it. I'm looking at BCR in my port. I've owned for 12 years, have no idea what it does or why I bought it, but I've made 4x my money.

BCR???????????????? Unbelievable return

Give REM a good look.