Investing

HISS vs dividend darlings

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  • Oct 22nd, 2019 10:35 pm
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[OP]
Banned
Jan 20, 2017
584 posts
137 upvotes

HISS vs dividend darlings

Even though it is a simple question, I would like to hear from pros to make sure I am not missing anything.
For 100k, which one is considerably better - high interest saving accounts offering less than 3% or blue chip 4% dividend paying stocks like banks?
Time horizon 10 years, steady growth desired
Lets not go into resp vs savings vs tfsa
Thanks in advance for your thoughts
3 replies
Deal Fanatic
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Dec 14, 2010
5758 posts
6284 upvotes
10 years is a long time to leave in such low fixed income. Banks and other well established companies will continue to grow beyond the interest rates that a HISA will give you. Dividends will grow too, and if reinvested they will compound further. Banks are presently fairly valued, and so are other companies. Not every company carries the same risk. Have a diversified portfolio on companies that have a proven operating tracking record and are fairly valued. I am fairly confident that 10 years from now your account balance will be much higher compared to an account that sits on HISA for 10 years.

When purchasing companies that are fairly valued, the performance of your portfolio is directly related to the performance of these businesses. It's very unlikely that these solid businesses will now perform just like a HISA for the next 10 years.

Having said that, it will be more volatile. However price doesn't reflect the health of the business. So don't let the daily swings influence your decision before or after the purchase - have a clear plan on what you want to own and why you want to own. Have a plan to sell that company if business results or fundamentals (not stock price) no longer aligns with your goals or why you purchased it in first place.

If you absolutely needs to cash it in 10 years, have a plan to switch to better fixed income products, such as corporate bonds from high credit rating companies or fixed maturity corporate bonds ETFs and do a laddered approach for the last 3 or 4 years.


Rod
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Jr. Member
Mar 20, 2018
108 posts
59 upvotes
If you absolutely needs to cash it in 10 years, have a plan to switch to better fixed income products, such as corporate bonds from high credit rating companies or fixed maturity corporate bonds ETFs and do a laddered approach for the last 3 or 4 years.


Rod, can you elaborate what you mean by "laddered approach" for fixed maturity corporate bonds ETFs? A portfolio with several ETFs varying from short-term to long-term?
Deal Expert
Aug 2, 2001
16281 posts
6422 upvotes
stanleyinfrared wrote: Rod, can you elaborate what you mean by "laddered approach" for fixed maturity corporate bonds ETFs? A portfolio with several ETFs varying from short-term to long-term?


Bond laddering involves buying bonds with differing maturities.
The idea is to spread the risk along the interest rate curve.
The strategy is employed by risk-averse investors looking for income over growth.


https://www.investopedia.com/terms/b/bondladdering.asp

Using ETFs:
https://www.rbcgam.com/en/ca/learn-plan ... ier/detail

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