A popular question from my friends is “Where do I go for income in this low-yield environment?” There isn’t an easy answer.
Here’s why: Yields on money market funds are near 0%, and long-term Treasury bond funds are yielding below 3%. Vanguard’s Total Bond Market Index Fund is currently yielding 2.4%*, as of November 3, 2011. And for muni bond investors, our Vanguard Intermediate-Term Tax-Exempt Fund has an SEC yield of 2.55%* as of November 3, 2011, based on its current holdings.
In the past, I have expressed frustration with the financial press’s coverage of investment topics (Clearing the air on target date performance), and I’ve also blogged about how I feel investors are best served by ignoring financial pundits (Listening to the markets—not the pundits).
But occasionally, a fleeting glimpse of a longer-term, clearer reality is visible beneath the smoke and ashes of the “financial catastrophe of the week” featured in the headlines. It’s worth pointing it out when it happens—such as in the article Mixed emotions on our anniversary, which ran in the September 11 edition of the Wall Street Journal. The article offered a real-life example of what a long-term investment strategy can mean for an employee who makes a biweekly contribution of $250 to their 401(k) and gets a $125 employer match.
In recent weeks, stocks have sold off from their recent highs. It appears that the enthusiasm that drove equity markets higher since last March may have run its course.
Jeremy Siegel has a recent piece in the Financial Times that restates his view that stocks are the most appropriate investment for investors with a long horizon. I wonder how most of you look at this issue, especially after the recent market gyrations.
Are you still listening to Professor Siegel, or did you shred his book along with your fund statements from last year? I’d love to know how many of you agree with that view, and if your investment strategy reflects it.
Federal Reserve data indicate that between January and early May, bank savings deposits rose by almost $170 billion. At the current rate, new deposits for 2009 will exceed those in 2008, which totaled almost $330 billion.
Clearly, you’re voting with your money. While many of you have stayed invested, others have either withdrawn from the market or stopped committing new investment to the market—and, in some circumstances, both.
