I'm wondering what the 2020 answer would be to what would you do to generate a steady 4-5% annual return from $5 million?
Since its inception in 2000, VTSAX has an average annual return of 7.18% [0]. That's 20 years, multiple US presidential administrations, multiple people running the Federal Reserve, and a big economic downturn (2008) thrown in. It's boring and won't give you any cool stories to tell at parties but you'll likely get the 4-5%.
[0] https://investor.vanguard.com/mutual-funds/profile/performan...
Checkout various implementations of these portfolios:
1) Understanding All-weather portfolio: https://ofdollarsanddata.com/ray-dalio-all-weather-portfolio...
2) The Permanent Portfolio: https://www.bogleheads.org/blog/2014/09/11/harry-brownes-per...
3) Golden butterfly portfolio: https://portfoliocharts.com/2016/04/18/the-theory-behind-the...
4) All-in-one Risk Parity ETF based on an actively managed index: RPAR ETF: https://rparetf.com/rpar
5) Wealthfront risk parity mutual fund WFRPX: https://research.wealthfront.com/whitepapers/risk-parity/
The economy is in a strange place right now. Record high tech stocks with near record high unemployment. Incomes and stocks temporarily inflated by governement rescue money worldwide. An oncoming eviction/default bomb that governments keep kicking down the road.
If I had a significant amount of money I would half in US bonds and half in a Swiss bank account to ride out this volatility.
Look at Buffet, he's putting his money in Japan, a traditional safe haven currency outside USD
One thing to consider is protections against any one financial institution having liquidity issues or folding — with the US and something like a savings account this would be FDIC Deposit Insurance, which covers $250k per depositor, per FDIC-insured institution.
The safest way to steadily return 4-5% nominal is an approximate mix of:
55% VT (Global stocks) 40% BND (Total US Bond Market) 5% GLDM (Gold)
Whether that ends up being a real 4-5% return, as opposed to nominal or a definite 3% real, will depend on inflation.
More info on bogleheads.org
https://www.investopedia.com/terms/t/triple-net-lease-nnn.as...
Think of it like owning the property that a popular Starbucks location rents.
Obviously, the retail landscape has changed irrevocably in 2020.
The price/earnings ratio (or its inverse, the earnings yield), is a better measure of stock valuation than the dividend yield. In a taxable account it is better to get capital gains because of stock buybacks than to get dividends.
This ends up being a lot of money on a 5M investment, good call out.
In Canada we do see 2% - 2.5% GIC offerd by some of the banks from time to time with a bit of bonus (say $1,500 maximum), but it's still far from 4% to 5%.
Some markets are currently paying more than 4% as a whole: https://www.starcapital.de/en/research/stock-market-valuatio... . Russian stocks pay above 7%. Asian REITs have high dividends as well, e.g.: https://sreit.fifthperson.com/
> government policy continues to insist that home prices can never depreciate
Those policies are for old people cashing out, rich people buying investment properties, and even richer people who own real estate developers. What do you think are the odds that in... let's say 5 years, either of these groups will have less weight in public policy making than they do today? I think it's very, very close to zero.
In markets like Canada, lack of government investment in small towns, NIMBYism preventing density, and high rates of immigration, mostly to big cities where the jobs are, put consistent upwards pressure on real estate prices despite the end result sucking people dry. I think we'll sooner see negative interest rates to prop up further spending than a government willing to address this crisis head on.
If you have a mortgage, probably worth paying it off.
Invest in reducing energy costs -- insulation, renewables if in right place.
If you want a yacht, buy it now and rent it out until you need it.
personally i pick my own stocks. so far i am +35% since december and i was at +60% recently. it fluctuates but i am a long term investor so i just chill and don't sweat about it.
in the end it depends on how much work you are willing to "invest". you can flip alcohol or houses or daytrade but it all requires time and effort and it just becomes a job. hence i advocate for long term investing.
Edit: I'd love to hear input on why people are scared of options.
(I had a previous comment of the same sentiment that seems didn't fit well here)
Edit: I guess this one doesn't either?
