Comments on Dividend Growth Investor: Fixed Income for dividend investors

Bonds have been totally abysmal over the past few ...

2010-05-06T15:14:42.597-07:00

Bonds have been totally abysmal over the past few years. I had a few from a long time back when the interest rates were doing quite fairly, but otherwise I've been an absolute bear on them.

I stumbled across your blog here.. And I gotta confess. It's jam packed full of fantastic information! I've gotta subscribe and take some time to devour the content you got here. Om nom nom!

DIY, US Treasury Bonds are risk free. In a recess...

2010-05-02T13:09:07.758-07:00

DIY,

US Treasury Bonds are risk free. In a recession a lot of those Junk Bonds will default, taking my interest income down. Lossess in principal would also not be unheard of. Corporate bonds have a higher risk and a higher yield, but their fortunes are linked to the fortunes of the enterprise. If you think the company will do well, you might be better off in the common stock. If you think the company is not going to do well, then investing in either shares or bonds of that company doesn't make any sense to me.
I buy treasury bonds for diversification purposes only. If we get a great depression or "two lost decades" this portion of my portfolio would provide me with some income.

To me you leave a lot on the table by sticking to ...

2010-04-29T13:56:23.457-07:00

To me you leave a lot on the table by sticking to Treasuries. High yield bonds achieve very good returns in improving markets as we have recently experienced. In fact, they are a somewhat safe way to play an upturn because their high yields provide a nice cushion. Thus, for those afraid to get into the market over the past year, high yield bonds could have helped. Over the past 12 months (according to Bloomberg) JNK returned 40.7%, SPY returned 42.3%, and TLT -5%.
Today high yield isn't a real value because yield spreads have come in so much as default rates have dropped sharply. Still, to me, 5 to 10% of the portfolio makes sense. For the less aggressive LQD is worth considering I believe.