Very simply, they are high quality businesses that can grow their intrinsic value at
high rates of return over long periods of time.
After issuing bonds paying interest at, say, 5 percent, they would invest the proceeds and hope that they could earn
a higher rate of return over the life of the bond.
By sticking to companies that have the means to pay high dividend yields, you not only get the added bonus of a regular paycheque from your portfolio (now electronically deposited in your investing account), but studies show that you'll likely enjoy
a higher rate of return over the long run than the market typically provides.
To sustain such
a high rate of return over a decade and a half is very rare.
In a good business, i.e. one that is able to reinvest capital at
a high rate of return over a long period of time, the results can be dramatic, as seen in the coffee can portfolio.
Stocks carry higher investment risks than bonds or money market investments, but historically, they also have realized
higher rates of return over longer holding periods (see chart).
If you really want to earn
a higher rate of return over Treasuries, you can purchase legitimate triple AAA corporate bonds.
Not exact matches
Important factors that could cause actual results to differ materially from those reflected in such forward - looking statements and that should be considered in evaluating our outlook include, but are not limited to, the following: 1) our ability to continue to grow our business and execute our growth strategy, including the timing, execution, and profitability
of new and maturing programs; 2) our ability to perform our obligations under our new and maturing commercial, business aircraft, and military development programs, and the related recurring production; 3) our ability to accurately estimate and manage performance, cost, and revenue under our contracts, including our ability to achieve certain cost reductions with respect to the B787 program; 4) margin pressures and the potential for additional forward losses on new and maturing programs; 5) our ability to accommodate, and the cost
of accommodating, announced increases in the build
rates of certain aircraft; 6) the effect on aircraft demand and build
rates of changing customer preferences for business aircraft, including the effect
of global economic conditions on the business aircraft market and expanding conflicts or political unrest in the Middle East or Asia; 7) customer cancellations or deferrals as a result
of global economic uncertainty or otherwise; 8) the effect
of economic conditions in the industries and markets in which we operate in the U.S. and globally and any changes therein, including fluctuations in foreign currency exchange
rates; 9) the success and timely execution
of key milestones such as the receipt
of necessary regulatory approvals, including our ability to obtain in a timely fashion any required regulatory or other third party approvals for the consummation
of our announced acquisition
of Asco, and customer adherence to their announced schedules; 10) our ability to successfully negotiate, or re-negotiate, future pricing under our supply agreements with Boeing and our other customers; 11) our ability to enter into profitable supply arrangements with additional customers; 12) the ability
of all parties to satisfy their performance requirements under existing supply contracts with our two major customers, Boeing and Airbus, and other customers, and the risk
of nonpayment by such customers; 13) any adverse impact on Boeing's and Airbus» production
of aircraft resulting from cancellations, deferrals, or reduced orders by their customers or from labor disputes, domestic or international hostilities, or acts
of terrorism; 14) any adverse impact on the demand for air travel or our operations from the outbreak
of diseases or epidemic or pandemic outbreaks; 15) our ability to avoid or recover from cyber-based or other security attacks, information technology failures, or other disruptions; 16)
returns on pension plan assets and the impact
of future discount
rate changes on pension obligations; 17) our ability to borrow additional funds or refinance debt, including our ability to obtain the debt to finance the purchase price for our announced acquisition
of Asco on favorable terms or at all; 18) competition from commercial aerospace original equipment manufacturers and other aerostructures suppliers; 19) the effect
of governmental laws, such as U.S. export control laws and U.S. and foreign anti-bribery laws such as the Foreign Corrupt Practices Act and the United Kingdom Bribery Act, and environmental laws and agency regulations, both in the U.S. and abroad; 20) the effect
of changes in tax law, such as the effect
of The Tax Cuts and Jobs Act (the «TCJA») that was enacted on December 22, 2017, and changes to the interpretations
of or guidance related thereto, and the Company's ability to accurately calculate and estimate the effect
of such changes; 21) any reduction in our credit
ratings; 22) our dependence on our suppliers, as well as the cost and availability
of raw materials and purchased components; 23) our ability to recruit and retain a critical mass
of highly - skilled employees and our relationships with the unions representing many
of our employees; 24) spending by the U.S. and other governments on defense; 25) the possibility that our cash flows and our credit facility may not be adequate for our additional capital needs or for payment
of interest on, and principal
of, our indebtedness; 26) our exposure under our revolving credit facility to
higher interest payments should interest
rates increase substantially; 27) the effectiveness
of any interest
rate hedging programs; 28) the effectiveness
of our internal control
over financial reporting; 29) the outcome or impact
of ongoing or future litigation, claims, and regulatory actions; 30) exposure to potential product liability and warranty claims; 31) our ability to effectively assess, manage and integrate acquisitions that we pursue, including our ability to successfully integrate the Asco business and generate synergies and other cost savings; 32) our ability to consummate our announced acquisition
of Asco in a timely matter while avoiding any unexpected costs, charges, expenses, adverse changes to business relationships and other business disruptions for ourselves and Asco as a result
of the acquisition; 33) our ability to continue selling certain receivables through our supplier financing program; 34) the risks
of doing business internationally, including fluctuations in foreign current exchange
rates, impositions
of tariffs or embargoes, compliance with foreign laws, and domestic and foreign government policies; and 35) our ability to complete the proposed accelerated stock repurchase plan, among other things.
Also, as bond
rates rise, some
of the money that migrated
over from the bond market in search
of higher yields will
return to the safety
of fixed income.
«Leaving the question
of price aside, the best business to own is one that
over an extended period can employ large amounts
of incremental capital at very
high rates of return.»
Sounds great, but as the Governor says these
higher rates of growth still imply «that the economy will (only)
return gradually to capacity
over the next two years or so».
I've often called it the Iron Law
of Valuation: the
higher the price you pay today for a given stream
of future cash flows, the lower your
rate of return over the life
of the investment.
«We have all been taught that earning
high rates of return requires taking on greater risks... If an investor can make virtually risk - free bets with outsized rewards, and keep making the bets
over and
over, the results are stunning.»
Unreasonably
high rates of return many not be sustainable
over prolonged periods
of time due to various market conditions.
A mix
of stocks and FIAs modeled under interest
rate scenarios
of up to 3 percent increase
over a three - year period, generate
higher returns compared with the more traditional 60/40 stock and bond portfolio.
One factor supporting the Australian dollar
over the past couple
of years has been that interest
rates right across the yield curve in Australia, and perceived
returns on other assets, have been
higher than those in a number
of other countries, particularly those which experienced a recession and a collapse
of share prices in the early part
of this decade.
Over time, the cumulative
return grows even more as the benefit
of higher rates compound.
IQ options broker offers
high returns rates of over 92 %.
In addition, I assume that all income received is reinvested, which is important because reinvesting income at
higher rates helps offset the losses in the initial hike year and increases the total
return of the bond portfolio
over time.
Dropping that percentage to 35 %
of moneyline bets yields an even
higher rate of return of 3.6 %, good for +118.8 units
over that span.
Among associations representing pension managers, for instance, much debate has focused on whether the 8 percent
rate of return assumed
over the valuation period is too
high.
Keep in mind that if you have
high - interest debt (anything
over 5 % or 6 %) you should pay off that first since you will get a guaranteed
return of that said
rate.
After testing a variety
of withdrawal
rates using historical
rates of return, Bengen found that 4 % was the
highest rate that held up
over a period
of at least 30 years.
If the interest
rates on your other debt - car or student loan or mortgage - is
higher than what you could earn by saving or investing (consider that the average annual inflation - adjusted historical
return of the U.S. stock market is just
over 6 %), you'd be wise to pay that down first too.
I've only used the two Global Couch Potato
returns, as they were closer to the median between the lowest and
highest annualized
rate of returns for balanced equity portfolios
over the last 10 years:
This simulation (hat tip to reader John for the link) found that using DCA
over 36 months resulted in
higher returns in just 30 cases out
of 493 — a dreadful 6 % success
rate.
The table below shows
returns over 1 - Mo, 3 - Mo, 6 - Mo, and 12 - Month time spans following periods where the percentage
of countries with rising
rates was either low or
high.
And while rising
rates are bad for bonds and bond funds in the short - term, climbing yields can actually boost
returns on a diversified portfolio
of bonds
over the long haul, as interest income and proceeds from maturing bonds are re-invested at
higher rates.
What is the benefit
of the Interest Plus + annuity
over other guaranteed fixed
rate annuities?The Interest Plus + annuity is designed for the consumer who desires a
higher - than - average
rate of return, but with the ability to access funds for any reason or amount — without incurring an excessive surrender charge.
Remember, nothing is a more powerful wealth building tool than compounding
high rates of return on an annual basis
over a prolonged period
of time.
nothing is a more powerful wealth building tool than compounding
high rates of return on an annual basis
over a prolonged period
of time.
If you look at periods where the price / peak earnings multiple was 16 or
higher on the S&P 500, the final
rate hike
of a tightening cycle was actually associated with losses on an annualized total
return basis, averaging -7.18 %
over the following 6 months, -9.94 %
over the following 12 months, and -5.87 %
over the following 18 months.
You are also able to preserve your investable assets, which historically, can generate a
higher rate of return when invested
over a greater period
of time.
Would be interesting to compare
returns over time
of Investors Business Daily CAN SLIM Select stocks (let's say those with a composite
rating of 80 or
higher and an Accumulation / Distribution
rating of B or
higher) with AAII's Shadow Stock portfolio.
As a result,
over time your policy gets more and more efficient, paying you a
higher internal
rate of return the longer you have the policy.
That same million dollars, invested gradually
over a twenty - year working - and - investing period, would achieve a significantly
higher rate of return.
Over the most likely horizon, what
rate of return do you want to earn on your money, relative to money market
rates and yields on
high quality long bonds?
The quintle
of countries with the
highest growth
rate over the previous five years, produced average
returns over the following year
of 6 %; those in the slowest - growing quintile produced
returns of 12 %.
This is on top
of the problem that when
high - quality long interest
rates are so low, it is typically a bad time to try to make money in financial assets, because
returns on risky assets are typically only 0 - 2 % percent
higher than the yield on long BBB / Baa debt
over the long run.
Bond
returns rise if interest
rates rise
over the long term because
of higher reinvestment
rates for cash flow, and again, it doesn't matter whether that comes from inflation or real
rates.
On the other hand, the more aggressive the asset allocation, the
higher the initial spending
rate — with one caveat: As the equity percentage approaches 100 %, the
return volatility will likely increase, and
over shorter time horizons may actually increase the chance
of prematurely running out
of money.»
Let's look at what happened to the change in the CAPE valuation multiple and its contribution to total
returns in the 1960s, which was an environment
of low interest
rates to start with which moved
higher over the decade.
As the end
of December, my weighted average interest
rates were 17.95 % and 15.35 % in my Roth IRA and taxable accounts, respectively, giving me the potential for
high returns over the course
of the next few years.
The estimate
of 4 % equity
returns over margin
rates, which are
higher than bond yields, is hooey.
And if you can earn a
higher rate of return on your RRSPs than your mortgage interest
rate over the long run, this helps to reinforce further not taking RRSP withdrawals as a better strategy.
You can also set up CD ladders that allow you roll
over your CDs in such a manner that you can have regular access to your money while still earning a
higher rate of return.
IQ options broker offers
high returns rates of over 92 %.
For this reason, lenders will charge a
higher interest
rate for long - term loans because the guaranteed
higher return on their money helps to shield them from the ups and downs
of the market
over a longer span
of time.
Your investment strategy will change
over time, reflecting your investment horizon (how much time there is between now and when you want to access the money you are investing) and your risk tolerance (how much risk you are willing to take in exchange for a possible
higher rate of return.)
First published in 1992 and now updated for 2009, the booklet discusses
over fifty academic studies
of investment criteria that have produced
high rates of investment
return.