I have 0 index funds, its all individual blue chips. I just don't see the point of owning SPY which has a 2% yield after the big price drop today when I can build my own mutual fund of companies that all yield 3-5%.

I mean I know it's "riskier" but look if you've got a $3M portfolio the difference between 2% and 4% is $60,000/year in dividends....thats a pretty damn big difference so I stick to the high yielders with great dividend histories. Frankly I don't have 1 stock with a sub $100B market cap so I don't really see it as being risky.

Like I said I've owned individual stocks for nearly 20 years, and for the average investor who doesn't take the time to study balance sheets, dividend payout ratios, and other important indicators, indexing is an awesome option.

I don't hate it....but it's just not for me and my particular goals of a SIGNIFICANT dividend stream that grows annually in excess of inflation.

Really would a 5 stock portfolio of say coke,chevron,phillip morris,altria, and mcdonalds be considered risky? That would give you average yield of almost 4% with incredible blue chips....even if its only 5 companies, if those companies have great products and solid balance sheet, who cares if you're diversified into 100+ companies or whatever the media tells you to diversify into?

This post was edited on 6/20/13 at 5:46 pm

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Posted by jimbeam

University of LSU

Member since Oct 2011

75703 posts

Posted on 6/20/13 at 5:44 pm to ThaBigFella

Gotcha. I don't know enough at this point about the ins and outs. Would really like to learn though.

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Posted by NC_Tigah

Carolinas

Member since Sep 2003

124188 posts

Posted on 6/20/13 at 6:05 pm to ThaBigFella

quote:
I just don't see the point of owning SPY which has a 2% yield

Except, to be fair, the OP question related to "buy and hold."

quote:
I can build my own mutual fund of companies that all yield 3-5%

Many folks talking "buy and hold" actually mean "buy and forget about it" (for extended periods). In those circumstances high quality MFs are a reasonable option. In fact, I'd argue diversified MFs are a dissociated investor's best option. Individual equities . . . not so much. Not sure we ferreted out what the OP "buy-and-hold" thesis was, after-tax performance vs attentiveness vs other.

IMO post-tax returns/profits in the post-March'09 market have better been attained via trading range strategies, than with buy-and-hold. But like you, we stay on top of this stuff daily.

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Posted by RidiculousHype

St. George, LA

Member since Sep 2007

10224 posts

Posted on 6/20/13 at 9:39 pm to ThaBigFella

quote:
Really would a 5 stock portfolio of say coke,chevron,phillip morris,altria, and mcdonalds be considered risky? That would give you average yield of almost 4% with incredible blue chips....even if its only 5 companies, if those companies have great products and solid balance sheet, who cares if you're diversified into 100+ companies or whatever the media tells you to diversify into?

To your point, I ran a quick chart with those companies compared to a solid large cap MF over the last 5 years:

Only Chevron has under-performed the MF... the rest have soundly beaten the MF. And best of all, the 5 stocks' yields are about double that of the MF.

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