Nov 17
Dividend ETF – HYG
This morning I picked up shares of HYG, a high yield corporate bond ETF. HYG is currently paying over 9%, a very respectable return. I ran an analysis on a portfolio containing only this one ETF to see what the chances were of running out of money in retirement given a number of assumptions. While a portfolio containing only one investment provides no diversification, I was surprised at the rather low risk involved by holding only this one investment. Also, there was a very low probability of running out of money, based on my standard assumptions.
After the HYG test, I began adding other asset classes such as U.S. equities, emerging markets, developed international markets, commodities, other bonds, and REITs. While the Return/Risk ratio did not improve significantly through the addition of other ETFs, the diversification improved dramatically.
Similar portfolios are analyzed in more detail over on the Premium Content side of the blog.
Photograph: Square in Cusco, Peru
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