Computerized Investing > Fourth Quarter 2012

What Members Are Asking Online

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The Data Is/Are In

After reading your On the Internet article in the Third Quarter 2012 issue, I wanted to point out your incorrect usage of data as a singular noun. The article repeatedly stated “data is,” while “data are” is the correct form. Data is plural and datum is singular. Please clean up your terrible English or get an editor!

—D.T. Curtis, Dunlap, Illinois

CI Editor’s Response:

The English language is beset with many quirks and idiosyncrasies. Data is one of those words that, like it or not, doesn’t have a clear-cut right or wrong use. Garner’s Modern American Usage refers to data as a “skunked” term: a word that undergoes a change from one use to another, and its use is likely to be the subject of dispute as one group insists on the traditional use while others embrace the new use. Here at AAII, we follow the Associated Press Stylebook, and this is what it says about data: “A plural noun, it normally takes plural verbs and pronouns.” However, it then goes on to pass the buck with this final entry: “See the collective nouns entry, however, for an example of when ‘data’ may take singular verbs and pronouns.” The Microsoft Manual of Style (yes, there really is such a thing!) is more emphatic about how to use data: “Use as either singular or plural in meaning but always with a singular verb. That is, always use ‘the data is’ (or another appropriate verb) whether you mean a collection of facts (plural) or information (singular).” It goes on to say: “Do not use datum or data are. They are etymologically correct, but some users may not recognize datum, or they may see both datum and data are as pretentious.”

Getting Into the Model Shadow Stock Portfolio

I’m new to the Model Shadow Stock Portfolio. It seems to me that the easiest way to get started is to buy all of the stocks in the portfolio that are listed on the website and then trade them whenever the website does. Basically, mirror the website portfolio. I’m lazy, and this seems to be the easiest way to do this. Could someone give me an opinion on why I shouldn’t do it this way?

—MO12522 via Web inquiry

CI Editor’s Response:

This seems to be a question that comes up very frequently. AAII’s Model Shadow Stock Portfolio generates a high level of interest among our members, and for good reason—the portfolio simply performs well. The difficulty lies in how one builds up a Shadow Stock portfolio of his or her own. There is not one good answer because, quite frankly, there are several ways to create a Shadow Stock portfolio. The Shadow Stock portfolio was originally developed to be an example of how individual investors can build wealth through small stocks that institutional investors cannot invest in. The buy and sell rules are all listed prominently on the AAII website and in each AAII Journal Model Shadow Stock article. If you feel comfortable with the buy and sell rules and in using discount brokerages, you can create your own Shadow Stock portfolio by simply using a stock screening program, such as AAII’s Stock Investor Pro. As a matter of fact, Stock Investor Pro includes the Shadow Stock screen as a predefined screen. If you choose to do it yourself, your portfolio will be different from the one that appears on our website, but it will follow the same general principles. Alternatively, if you are uncomfortable with doing that much personal research, you can strictly follow AAII’s portfolio. Buying all the stocks and following it as reviews are done quarterly will provide you with the closest portfolio to AAII’s. However, you may incur high fees and expenses by buying over 25 holdings at once. In addition, some of the stocks may be approaching size or value limitations. A third option is to buy stocks as they are added to the portfolio. Your portfolio will not be up to speed for several years, but the holdings that you are adding are ones that are meeting AAII’s Model Shadow Stock Portfolio’s guiding principles.

Income or Growth in Retirement?

There are two popular and primary methods for generating retirement income from investments. One approach is to focus on total return and withdraw a “safe” percentage of total assets each year. The other approach is to generate income from interest and dividends. Which approach do you follow (or plan to follow) in your retirement—total return/withdrawal or dividend/income?

—jamkar via Web inquiry

CI Editor’s Response:

This has certainly been a hot topic as of late. With the low interest rate environment, many investors are turning to dividend-paying stocks or even growth stocks for income during retirement (using growth stocks by liquidating a portion every year). There are two disadvantages to investing in pure fixed income during an ultra-low interest rate environment—the low payments received and the decline in market value of the fixed-income investment should interest rates rise going forward. Because of this, it may be beneficial to most investors to look at different approaches to generating income. Dividend-paying stocks have been a prudent investment vehicle, offering yields that are higher than most investment-grade bonds, while offering possible growth potential. Due to demand for these stocks, AAII has created the AAII Dividend Investing portfolio this year, which is a portfolio of stocks that offer growth and yield. In addition, this issue’s On the Internet article discusses three websites that provide data focused on dividend-paying stocks. Alternatively, more risk-tolerant investors can look into a portfolio focused on total return and simply liquidate a safe percentage yearly. Historically, a “safe” percentage during retirement has been around 4%.


John Whitney from AL posted over 5 years ago:

Reference: 'Income or Growth' in Retirement? Another alternative to dividend stocks may be a judicious selection of Closed End Funds.... many times one can achieve "premium discounts" on a particular fund, bond or equity, jacking up the Fund's distribution rate dramatically. Distribution's come in the form of monthly and.or quarterly pay outs. I have some in my retirement portfolio and in this low interest rate environment they have appreciated smartly. However, if and when rates begin to start up, those funds will lose their luster: must sell prior to that!

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