Overlooked Approaches to Growing Your Portfolio Value

By Charles Rotblut, CFA 

Defined-maturity funds strike a middle ground between bonds and bond funds. Like bonds, these funds mature on a specified date and return the capital to shareholders. Like bond funds, they are professionally managed and benefit from economies of scale that a large portfolio offers. As hybrid investment vehicles, defined-maturity bond funds come with both compromises and unique characteristics that should be understood and considered before purchase. In A Fresh Look at Defined-Maturity Bond Funds, Charles Rotblut provides an overview of what defined-maturity funds are and how they compare/contrast to both bonds and traditional bond funds.

Some key points that the article highlights include:

• Key differences between bonds and bond funds: maturity versus perpetuity
• Characteristics of defined-maturity bonds versus bonds and how they impact your portfolio
• List of the current defined-maturity funds
• How interest rate risk can be managed using termination dates in a defined-maturity bond fund

The underlying premise for defined-maturity bonds lies in the key differences between bonds and bond funds. Understanding the aspects of these funds is the first step in seeing if this bond fund alternative is a better fit for you than traditional bonds or bond funds. The more you know, the better you will be equipped in your investing decisions.

By Lowell G. Miller 

Amid all the talk these days of market volatility, high-frequency traders and the like, it is easy to overlook the humble income-generating strategy of compounding dividends and dividend growth. Dividends account for more than 40% of the stock market’s total return. But how can individual investors such as yourself harness the power of reinvesting growing income? Here at AAII, we are constantly on the lookout for insights, research, tips and factual advice that can grow your investable assets. In the article, The Power of Compounded Growth and Reinvested Dividends, you can learn how compounding growth and dividend reinvestment can power your portfolio.

Some of the important highlights from the article include:

• How to generate a yield higher than the stock market by reinvesting a growing stream of dividends
• The two key ingredients required to harness the power of reinvesting growing income
• The importance of “yield on original investment” (YOI) and its impact on future dividend income

Dividends provide a segment of return that is always positive. Increases in dividends provide an increased positive cash return and, consequently, increase the value of the instrument producing that return. Positive fluctuations are normal in the world of cash payments to shareholders; negative fluctuations are a rarity. Over time, reinvesting income that increases can result in yield from income alone that’s far higher than anyone can reasonably expect from the total return in the equity market.