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An Easy Way to Solve the Biggest Problem Facing Investors TodayBy
Monday, October 21, 2013
"All income-generating assets are below their average yield… and most are near all-time lows."
That's what master researcher James O'Shaughnessy told the Big Picture Conference earlier this month.
He went on to say that he believes the biggest problem facing investors today is income. You see, James' research shows that now is the toughest time in 140 years for investors trying to generate income.
But he also revealed a simple solution you can easily put to work today...
James has made a career of looking back at history to find insights into what's happening today.
In his fantastic book, What Works on Wall Street, he ran the numbers on nearly every investment idea you could dream up. (I keep a copy on my desk at all times.) And he's built a successful money-management business that invests around $5 billion using strategies based on his research.
Today, James' research shows that most income investments, especially bonds, aren't paying the kinds of yields investors need to survive.
Bonds have been in a multi-decade bull market. As prices go up, yields come down. Thirty-year U.S. Treasurys only pay 3.65% as I write. And James believes they'll be a losing proposition over time...
"Long-term bonds have done very well for a very long time," he says. "No one remembers that long bonds lost 68% after inflation from 1941-1981... but it can happen again."
You read that right... After inflation, "safe" long-term bonds lost 68% of their value from 1941-1981. Today, with high prices and low yields, we could be in store for another multi-decade bear market.
James believes the best thing you can do to generate income is to avoid bonds and buy international stocks that pay dividends.
Even during the greatest period in history for long-term bonds (1981-2011)… you'd have beaten them by simply owning global dividend-payers.
Right now, he believes global dividend-payers are the easiest and safest way to generate income. And I've found an easy way to make the investment.
Today, you can buy a basket of cheap international stocks through the iShares International Select Dividend Fund (IDV). IDV currently pays a 4.8% dividend.
This fund holds 100 of the best global dividend-payers. And it only holds companies that have consistently paid big dividends.
Based on history, this is a winning strategy. The index IDV tracks has crushed the stock and bond markets since its creation in 1998. Take a look:
 Over the last 15 years, this basket of global dividend-payers more than doubled the return on 30-year Treasurys. And it more than tripled the return of U.S. stocks.
Importantly, this fund is cheap... It trades for less than 14 times next year's expected earnings. And don't forget about that 4.8% dividend.
One of the smartest number-crunchers around – James O'Shaughnessy – believes now is the time to get out of bonds and get into global dividend stocks.
You can put this strategy to work through shares of IDV. It's been a winning investment. And I expect that to continue.
Good investing,
Brett Eversole
Further Reading:
Friday, Brett showed readers another way to easily generate income. "There is one investment that's paying big yields... more than 5%," he wrote. "And thanks to a tax advantage, that yield could be worth 8%-plus." Get all the details on this safe opportunity to collect big income right here.
Editor in Chief Brian Hunt says there's one "worry-free way" to generate income in today's world... It's hard for most folks to grasp this idea, he says. They're too busy "trying to get the market to do something for them... instead of using the greatest power in all of investing." Learn what it is right here.
Market NotesNEW HIGHS OF NOTE LAST WEEK
CurrencyShares Australian Trust (FXA)... Australian dollar
New Ireland Fund (IRL)... Irish stocks iShares Germany Fund (EWG)... German stocks iShares France Fund (EWQ)… French stocks iShares Italy Fund (EWI)... Italian stocks iShares Spain Fund (EWP)... Spanish stocks iShares Australia Fund (EWA)… Australian stocks iShares Hong Kong Fund (EWH)… Hong Kong stocks iShares Brazil Fund (EWZ)... Brazilian stocks Euro Stoxx 50 Fund (FEZ)… European blue-chip stocks SPDR S&P 500 (SPY)… large-cap stocks PowerShares Buyback Achievers Fund (PKW)… shareholder rewards Market Vectors Gaming Fund (BJK)... casino stocks iShares U.S. Consumer Fund (IYC)... the American consumer lives on iShares Technology Fund (IYW)... technology stocks iShares U.S. Financial Sector (IYF)… financial stocks iShares Insurance Fund (IAK)… insurance stocks SPDR International Health Care (IRY)… health care stocks PowerShares Pharmaceuticals (PJP)... Big Pharma stocks ProShares Ultra Health Care Fund (RXL)… drug stocks iShares S&P Global Energy Fund (IXC)... energy stocks PowerShares Clean Energy Fund (PBW)... clean energy stocks iShares Basic Materials Fund (IYM)… resource stocks PowerShares Oil Services Fund (PXJ)... oil services stocks iShares Transportation Average Fund (IYT)... transportation stocks |
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