The Better Than Bond. Payment In Dollars Not Pennies.

Hong Kong, city, mist
JANUARY 21, 2019.  Love in Gotham is unknown, particularly when talking fixed income.  Out from the bowels of this rotten city sprang the modern “bond fund,” heavily disguised as an “investment vehicle.”

 

Night-dreaming

your way through fixed-income produces results similar to automobile crumple zones. Yet mashed returns are common to market tourism, particularly for bond fund buyers. Even Batman can’t make bond funds fly. So why try? Alternatives exist.

Popular culture historians will tell you that bond funds were birthed ugly deep below Gotham City. Who knew? Commissioner Gordon flatly refuses to hold bonds–in any form. Once we cornered him at a Wayne Manor blast he claimed disgustedly to have actually “seen how they were made.” Well, maybe.

Either way, bond funds are in reality stock market vehicles riding on a comfy cushion of fees, and semi-mysterious low-paying paper promises. “Complexity” you say?  Well–yes.  Complexity leads to confusion and confusion often results in wreckage, except for the Fund Family.  They live right next door to Bruce’s place.

Selling bond funds is more business than investing.  That foul reality alone sent us out, along with the postal service, into the gloom of a Gotham night in search of an alternative. STOCKJAW shows you the goods–bond and bond fund alternatives. All pay more–much more. And with equal safety. See what we uncovered.  

 

BOND FUND

TOTAL RETURNS

As good as these get.

(Total returns assumes reinvestment of all dividends and capital gains; does not include sales loads, redemption fees, or tax implications on any said “distributions.)

                 1Y               3Y             5Y              

iShares U.S. Treasury Bond ETF(GOVT)

GOVT  0.26%         1.09%      1.77%

SPDR Bloomberg Barkley’s High Yield Bond ETF(JNK)

JNK     -3.3%           5.6%        2.06%

Vanguard Total Inter. Bond Index ETF(BNDX)

BNDX  2.8%           3.3%        3.92%

Vanguard Intermediate-Term Bond Index ETF(VCIT)

VCIT  -1.7%            2.9%        3.43%

Vanguard Short-Term Treasury Index ETF(VGSH)

VGSH   1.6%         0.9%         0.73%

STOCKJAW  took the highest returning period from the 15 periods and five funds above and stuck it in an eardrum-shattering shoot-out with four dividend paying faves.  Take a look and you decide.

 

 

AT&T

stands as an example.  As lousy as it is, it’s better than a mountain of bond funds.  Are bond funds a good investment?  Not all income paying vehicles are equal.  T now spins a 6.66% dividend–oops.

Even with that, over the past year T has provided a total return of -11.5%.  You can do that without even owning T.  That number includes reinvested dividends.  That’s ugly regardless of how it’s presented.   Over three years it’s 6.6%, and over five year it’s 19.6%.  These are not glorious results.  Were that the entire story we wouldn’t have bothered.

 

 

AT&T

Telecom

AT&T(T) 1-21-19; 7:01 AM, CST.
chart, t-ov. jnk, 1-21-19
No dividend lies beyond the cost-cutting cleaver. Nonetheless, telecoms and utilities rank among the most stable income providers anywhere. In fact, as pension funds now reap the backlash of there own mismanagement, companies like the ones we cover here will likely go on paying, while maintaining fairly stable underlying share prices.

 

AT&T Total Return

1 year -11.5%, 3 year 6.6%, 5 year 19.6%.

Assumes automatic dividend reinvestment.

 

Verizon

Telecom

Verizon(VZ), 1-21-19; 6:51 AM, CST.
chart, vz-ov. jnk, 1-21-19
Verizon’s superior positioning and manageability will pay off over time, relative to the debt-ridden chaotic AT&T.

Verizon Total Return

1 year 15.8%, 3 years 47.0%, 5 years 53.7%.

Assumes automatic dividend reinvestment.

 

 

Starwood Property Trust–REIT

Starwood Property Trust(STWD), 1-20-19
chart, stwd-ov. jnk, 1-21-19
In exchange for favorable tax treatment many companies now use the “REIT” structure. Many income investors love them, and the Master Limited Partnership(MLP). Unlike the MLP, REITs do not create any potential tax backlash when held within a retirement vehicle. Dividends above 5% begin to raise red flags. STWD has thus far proved an exception.

Starwood Property Trust total return:

1 year 10.7%, 3 year 47.6%,  5 year 34.9%.

Assumes automatic dividend reinvestment.

 

American Electric Power–utility

American Electric Power(AEP), 1-21-19; 6:47 AM, CST.
chart, aep-ov. jnk, 1-21-19
Charts represent the precise footprints of performance. In an extended era of ultra-low fixed income yields, none can compare to this. Even when withdrawing the bountiful dividend, AEP yet provided stunning “sleep at night” returns of over 45.0%–and rock bottom, simple costs. $10 bucks if you buy/sell only once. Still want to pay ragging fund fees?

 

American Electric Power Total Return

1 year 16.4%, 3 year 44.1%, 5 year 94.9%.

Assumes automatic dividend reinvestment.

 

graphic, cover, stwd

Starwood’s future looks good.  Yet how can any company pay 9%?  See how, or if, in our in-depth piece:

Starwood Trust.  9% harbor, Or Comedic Goof?

https://stockjaw.com/2018/12/20/starwood-trust-9-harbor-or-comedic-goof/

 

batman-2327941_1280

 

Thanks for Reading.

aaa-stockjaw-the real black, 125%, fixed

STOCKJAW.COM

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https://pixabay.com/en/photos/
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Additional resources:

Investopedia.com.  Seriously Wonderful.  Fact.
http://www.investopedia.com/
Charles Schwab.  In Our Opinion, the best broker going.
https://www.schwab.com/public/schwab/client_home
STOCKJAW.COM EARNESTLY THANKS YOU FOR YOUR INTEREST AND WISHES YOU THE VERY BEST.  THE WORLD BEING WHAT IT IS, WE MUST POST THE FOLLOWING:  ALL CONTENT ON STOCKJAW.COM IS PURELY FOR GENERAL EDUCATIONAL AND ENTERTAINMENT PURPOSES ALONE.  ANY ACTION TAKEN BY ANY READER IS THE SOLE CHOICE AND RESPONSIBILITY OF SAID ACTOR.
Be careful.  Do the work.  Have patience, with yourself.  Never put your dreams away.

 

STOCKjAW

Dollars Are Employees. We Make Them Work. Slack Dollars Reborn Busy. STOCKjAW helps You make the dollars you worked for work back. Do it simple and streamlined. Or do it Full-Bore. Stocks, ETFs, and more. It's Your cash. Sj helps you point it in the correct direction.

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