Jan 9, 2013|
Kiplinger's Jim Glassman with his Investment Insights
Transcript - Not for consumer use. Robot overlords only. Will not be accurate.
Joining us now we do have Jim Glassman. From Kipling. And do you change any of your water have its terms of either watering lawns showering just watching toilet use. Any changes just keep that water bill down. Well. Truth I don't. -- acknowledge UK market -- -- it is a war built here and in Maryland are really not all that high though. I really am not paying them to it. All right well we'll get right in to talking about -- your portfolios and and really what you're looking at right now. Is it's a very low interest rate environment for investors out there so if we're looking at traditional instruments like treasurys. Is there anyway you can get anywhere near a 4% yield at this point. The short answer is no you can't. You get anywhere close that by Gloria thirty years and even and you're going to be 11 and a half percent. Short though. Treasuries -- really not a place to be right now. You know these things in my editors certainly gonna change over time. But right now -- looking for 4% and I think it's about all year and again I think 5%. Is going to be very very difficult without reaching for a lot of -- You gotta stay away from traders but there are a number of other alternative. And what do those that you might have available particularly if you're at a high tax bracket and you're talking about just getting equivalent yield here. What -- so in those tax brackets appear in that 3335%. Bracket start looking at municipal bonds are there any good values out there right now. Yes I do think that it is well on our good -- You know there's been some doubt about the tax situation from municipal bonds that seems to have been. Sorted out we can't can't be absolutely sure war. But yet there are values that they tend to be at the far end of the Specter and other words. Not gonna be buying -- five year municipal bond and get a decent return. But if you willing to go out and I am in indicate -- -- I think that that's located due. To -- -- twenty years. You can get some good deals where you're getting. Taxable. We have one. Around experts. I mean you know as if you're if you're one of the top tax bracket. So that's what the ticket wouldn't call -- an advantage but it's one of the consequences. Of the increase in in taxes for people on the upper brackets have been there now today. 40%. And so or close to 40% and therefore. That the value topic municipal bonds that tax free income nature. Is increased as well yes but what -- -- I would I would they're right -- right at the outset is that. I don't believe that in this income portfolio you should stick to any one that. Kind of income producing instrument they don't put all your money. But certainly the and even into. Fairly risky. Municipal bonds such as California bonds and Puerto Rico. Well and let's talk about maybe taking even a little bit more risk inside of a fixed income portfolio. What are your thoughts on that junk bonds high yield bonds in this environment. Well I have been a fan of junk bonds -- the last few years I feel right now that. The a lot of the -- because that higher rated junk bonds. Have gotten very crises that is to say that they error yields have gotten low. So I think with junk bonds. Have to take on a fair amount of risk in many cases that's perfectly fine to do. So arms deal interested in junk -- not as much as I was. Earlier. Now now we're looking. -- -- Fixed income in order to actually pull -- -- off the portfolio and a lot of talk over the last couple years about investors moving over. To dividend paying stocks so even with the increased taxation in particular for those in high tax brackets. Are these still something that should be a part of an income in -- income oriented portfolio. Absolutely and I think this sweet spot right now for income production. Is in fact. Dividend producing stocks and and I've been saying this for awhile has been consistently true but I think now when you look at other ways to deriving. Dividend paying stocks are are the best. In that group so yes I mean you look at a company like Johnson & Johnson. Yielding 3.4 percent mean that is that's a very attractive yield today is not quite up to four. It's a very attractive yield. And what happened in need the last tax go round was. That a dividend taxation moved up from 15% to 20% but it didn't go to 40% as some people thought it might know. Though so that's still attractive but India and you look at companies like Verizon four point 6% that's the way to get your four. There's there are a lot of very very attractive. Dividend producing docs out there right now. So in terms in terms -- of balancing all of these different types of holdings that we've talked about. How do you go about actually balancing these inside of a portfolio at this point. Well it could you need to make a dispute about how much of your portfolio. Should be income producing and how much should be capital. Depreciation and I think that has to do with what your own time horizon is what you're tolerance for risk is in general. I stated income producing should be about 50% of portfolio and I know that sound like a lot. But. In my in my most recent book state CNET I'd make the case which I think is pretty good one. For balancing. The need this special wrist that I think we brought in today's economy and going forward I think is gonna continue for awhile. We have. We -- higher capital appreciation to let's say it's 50% and it in the act case. You'd then have a number of ways to go -- in the income producing part of your portfolio. One of them that I particularly like right now is just the bonds and other is a dividend paying stocks. Another is junk bonds and another is. Is kind of medium rated but it investment grade. Bonds corporate especially on the financial side you're seeing some financial. Better yielding you don't have to go very far out in the order on the order 4% of companies like Goldman Sachs. And I think those are those as well are that are completely safe absolutely not. But I think that they are a good risk reward ratio so I want to divide those categories. By four. And so you've got to income producing side of your portfolio. And you've got a capital appreciation which is the stock. All right well Jim I appreciate it coming out this discerning and certainly appreciate your insight into portfolio construction for all of our listeners. All right that was Jim Glassman. From -- here and coming up after this break we are going to be joined. By -- -- from Morningstar talking about some -- -- stock picks as we go in to 2013. Right after this.