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Hi Tom. Re: Higher Yielders

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ls7550   Monday, 02/02/09 10:22:45 PM
Re: OldAIMGuy post# 1109
Post # of 1173 
Hi Tom. Re: Higher Yielders

The subsitutions were generally done to attain higher dividends for now. My hope is that the higher yield will help total return in the long run.

I've been doing a bit of the reverse and moving out of individual high yielding stocks and more into market index funds.

I felt uncomfortable under recent conditions as to (a) the survivorship of even the largest of household name stocks and (b) the security of dividends (and associated impact upon share price that dividend/earnings cuts might have) - so I opted to migrate towards market wide indexes for the greater security against total failure(s), using a style that expands exposure up to a maximum of 200% in order to generate the desired additional volatility.

Unlike you (now that you're back in the rat race and have a wage coming in) I depend solely upon investments for income and haven't the luxury of riding out dividend cuts. So my income is now largely being derived from volatility capture. I'm using the Dow as the principle holding as I wanted UK Pound currency diversification and have my Ladder set to a 19000 top (100% out) and 3642 bottom (200% in). The Ladder is structured to become fully 1X exposed at around current price levels, below that I start adding in 2X exposure progressively until its fully 200% stock exposed at that bottom price level.

Under current volatility levels that should generate sufficient net volatility capture benefits for my living expenses.

I had initially started with a 5700 Dow bottom price level, but felt more comfortable passing on some of the additional volatility capture benefits for the greater downside cover.

When things start to stabalise I'll revert back into high yield individual stocks once the outlooks appear more certain.

Best regards. Clive.

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