In today’s low rate world, where growth is becoming harder to come by, focusing on risk adjusted returns is more important than ever.
“A risk-adjusted return is a calculation of the profit or potential profit from an investment that takes into account the degree of risk that must be accepted in order to achieve it. The risk is measured in comparison to that of a virtually risk-free investment—usually U.S. Treasuries.” – Investopedia
Dividend stocks might yield 3-4%. Which feels better than the 1-2% you can earn in treasuries. And way better than the 0.5 – 1% you can earn in money markets or CDs (if that is even possible).
What are you trading for the extra return.
Is that a good trade right now? Don’t know. Been thinking about it a lot though.
“The answer is that there is no, and can be no safe, dependable way to make a high return in a low-return world,” Marks said. “It’s too good to be true.” – Howard Marks