Recently, my father invested in a number of Merrill Lynch closed end funds, e.g. USA, LCM, ETV, ETW, CSQ. At this point he's interested in income and these funds have relatively high dividend yields, e.g 6-9% per year.
However, I ran a Morningstar X-Ray against his portfolio of funds and they appear to have a similar allocation to a 65/35% stock/bond portfolio with about 10% of the stocks in international. So far, so good. Unfortunately, the portfolio's total YTD return, dividends plus stock price appreciation, was only 2.75%. A 65/35% portfolio of stocks/bonds based on Vanguard index funds was about 7.7% (this was last week :laugh
.
Consequently, he's receiving dividend income but his share price is rapidly eroding. This sounds like a bad investment to me, i.e. a portfolio with the risk associated with a 65/35% stock/bond portfolio and with a savings account-like total return. Any comments? Am I missing something?
However, I ran a Morningstar X-Ray against his portfolio of funds and they appear to have a similar allocation to a 65/35% stock/bond portfolio with about 10% of the stocks in international. So far, so good. Unfortunately, the portfolio's total YTD return, dividends plus stock price appreciation, was only 2.75%. A 65/35% portfolio of stocks/bonds based on Vanguard index funds was about 7.7% (this was last week :laugh
. Consequently, he's receiving dividend income but his share price is rapidly eroding. This sounds like a bad investment to me, i.e. a portfolio with the risk associated with a 65/35% stock/bond portfolio and with a savings account-like total return. Any comments? Am I missing something?
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