Does high yield shares/stocks also mean higher risk?

I'm going to start investing soon and am working closely with a funds manager who is going to set up a portfolio for me.

At first, I decided I wanted a 'balanced' portfolio with a balanced risk.. A portfolio with some yield and some growth too.. Seems to be approx 5.5% dividend return per year is the goal.

But now that I spent more than I wanted on a family home I'm starting to freak out that my cash is getting low and I want to make some money faster that what I think a balanced portfolio at approx 5.5% will give me in dividend return.

I feel I need yield of around 7%. Now if I were to balance my portfolio to be of higher yield does this also increase the risk of loss? I'm happy to give up capital growth for 2-3 years but not happy to increase risk. These are life savings I'm playing with and this is also what I retire with..

So my main question is, will a high yield / high dividend portfolio with little growth increase risk, or won't it? And is 7% dividend return considered high risk anyway?


-Frank

 

something like CMW will give you roughly 8% return ( if bought under $1 )

it currently pays 3 monthly with the option to DRP , it is currently a top 200 stock with reasonably liquidity ( allowing potential exits )

high risk ???

most current options are high risk ( yielding over 5% or not )

with CMW the less obvious risk is over-expansion ( capital risk if the property markets implode at an important time )

I hold CMW ( as a div. straight yield play )

 

I bought VHY ( the retail ETF version of Vanguard High Yield ) in 2011 and have nothing negative to say on them , but fortunate timing of the entry would bias the positive views. .

HOWEVER , in the current climate capital loss ( $$$value ) are possible if a severe dip in the markets .

this is a dangerous time to be playing with cash needed in the foreseeable future ( within say the next 12 months .

 

to clarify on the VHY holding I am up ( roughly) 26% in $ per share value and up 40% in number of units held as I DRP my dividends .

buying during a market correction ( July 2011 ) was pivotal to this result .

and your entry timing and any exit timing ( if required ) will be very influential in your results .

don't get me wrong I love ETFs , but also understand ( most of ) the risks and timing strategies needed .

have you looked at AAA which is a debt focused ETF ( I avoid the concept of 'sausage debt ' ) , but it may suit your better in a scenario where interest rates could conceivably rise )

 

I can't afford to lose the money at all. This is all I have..

If market drops 20% it's not a huge issue so long as it recovers within a year or 2 otherwise it will start to affect..

Funds manager is charging me 1% of the amount invested to manage my money and set up investments..

That Vanguard high yield funds looks interesting.. I will read up on it..


-Frank

 

that 1% ( and no certainty of a superior outcome ) is why I decided to do all those decisions myself .

I am far from infallible , but at least I can learn from what went wrong .

ETFs require intense reading ( and thought ) those little details can mean a lot .( good or bad for you )

now an unpleasant ( but possible ) issue could be a 'double dip ' correction/crash , so that recovery can be quite fragile in the short term ( less than 3 years is short term to me ).

Vanguard isn't the only game in town and I have spread my ETFs exposure across 5 different brands , using moments in time to adjust focus .

should there be a sizable crash ( XJO going below 4500 ) I will be looking at ILC and VLC on the logic the ASX top 20 companies will fall harder and rec over more reliably , than some others .

I also purchased MVB recently ( the top 7 banks .. the big 4 + MQG , BEN and BOQ )

the payout strategy may not suit you , but if going for a straight capital gains play , it just might .

good luck , some confidence-testing times ahead

 

Hi Frank,
You are braver than me if you are jumping in now with a requirement for more cash than you currently have now (the growth of capital part of your equation) in 2,3 or 4 years. By no means is it wrong and I truly hope for you that it does come off if you decide to pursue this. Just that you have more faith than me.
Hopefully I am wrong and it would be a good outcome for all if the markets keep moving.
And I do harp on about it but returns and risks of 6% of $20k is a very different proposition than 6% of $800k for most people.