Russell Bailyn has an article up on his blog about WisdomTree ETFs that is a good read.

In it he makes one comment that we have all heard before many times which is that “as baby-boomers start retiring, portfolio managers will be allocating portfolios towards dividend and other income-oriented products.”

The logic is obvious and I can’t really argue with it but I do question it whether the outcome can possibly be as expected. Specifically I question whether money allocated to dividend payers in the manner suggested will actually lift prices in some sort of advantageous manner for the people who get in now.

So many people believe it so (it seems) that I don’t think it will play out as expected. This strikes as the type of thing that will just turn out to be wrong. I am not saying these types of stocks will do poorly or even be a drag but simply there will be no out of the ordinary excess return.

I do believe in yield but the way I think of it is what is the yield of the entire portfolio in relation to the market. You can add 100 basis points in yield quite easily when you add yield in certain sectors like utilities, telecom, energy and of course financials and then add in one or two things, modestly weighted, that yield 7-8%. One example would be a call writing fund and for anyone new; modestly weighted is 2-3% of the portfolio.

As important as I think dividends are I think it would be a mistake to own nothing but high yielding stocks. You can’t be properly diversified owning nothing but yielders.

Now from the Hey Ma, Look category a bunch of blogs got mentioned here in BusinessWeek, including this one, but quite frankly I can’t tell if it is just online or made the print edition too but I suspect the former.

Last 5 posts by Roger Nusbaum

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