Dollars and Sense

Investment Consultant, Gary Goldberg Financial Services

Investors looking at the U.S. equity market may be wondering whether it has much gas left in the tank. We’re now six years into the current bull market and stocks have seen huge returns since the lows of the 2009 – the S&P 500 alone has more than tripled since the bottom hit during the financial crisis.
Investors who held their ground since then have done well of course, but with stocks up only modestly thus far in 2015, some may be concerned that we’ve hit a top in the market and are looking to fixed income as a “safer” place to position their portfolios. Not so fast.

Fixed income can be a wise choice when rates are elevated and expected to fall, but they should be given a second look when rates are low and expected to rise – as is the case now. As investors may know, the direction of interest rates tends to have an inverse relationship with the principal value of bonds. With the Federal Reserve widely expected to begin raising rates this year, the Gary Goldberg Financial Services Investment Committee believes our clients are better served in high-quality stocks instead of bonds, especially stocks that pay a reliable dividend that’s at least twice the yield of the benchmark 10-year Treasury.

The average yield of a component in the GGFS proprietary Dividend Buster Portfolio is slightly under 5 percent; compare that to the 10-year Treasury note, which is currently yielding around 2.3 percent. Investors in the Goldberg program of course benefit when the market goes up and the underlying securities rise in value, but the yields also offer protection in volatile times. Because the holdings are companies with long histories of paying dividends, as well as an established ability to raise the payout in both good and bad markets, down markets allow investors who reinvest dividends to essentially buy these high-quality names “on sale.”

While the Dividend Buster Portfolio is a great way to achieve both growth and income, investors must also be mindful of their individual needs for different time horizons, as well as the overall asset class diversification of their holdings. Our firm’s trademarked Montebello Process achieves these core investment goals of maximum diversification and risk management. Once we determine what our clients’ short-term needs are, we can begin planning for their intermediate and long-term goals.

Christopher Hanly is an investment consultant with Gary Goldberg Financial Services in Suffern and can be reached at (845) 368-2907 or [email protected].

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