No.. I am talking about investment grade notes or preferred stock of large insurance companies.. Please don't make sweeping statement without understanding.
Investment grade is not the same thing as risk free. AIG and Lehman bros were also investment grade before they went under in 2009.
That's right. There's the potential for capital loss, obviously.
As a technical matter, the probability of capital loss is never quite zero. We all live on this blue marble that could get whacked with a big space rock tomorrow -- I can't totally rule that out. However, conventionally, and in nominal terms, the government that prints the currency sets the benchmark for the lowest risk instruments in that currency. In Singapore, in Singapore dollars, that's a Singapore Government Security (SGS) purchased at initial auction and held to maturity, or a Singapore Savings Bond (SSB), a subtype of SGSes.
....OK, so Yyhwin is asking for strategies to achieve a consistent 6% yield without loss of capital. And the direct answer is there isn't such a strategy, because it's impossible as the question is phrased. However, if your time horizon is sufficiently long (or longer), if you're willing to allow at least some wobble in the yield (
average 6%, which is about 4% real), and if you're willing to allow some short-term capital loss, then you should be able to get a reliably good or excellent outcome. And we've talked already in this forum about how to do that. It's this sort of recipe:
* Doggedly save and invest every month for decades (four would be nice), with escalation when a higher savings flow is expected to be sustainable;
* Try to open and maintain a gap between gross income and day-to-day spending;
* Invest in a few low cost vehicles;
* Make sure those vehicles are at least reasonably well diversified;
* At 7+ years before you're going to need some of whatever you're saving, start adjusting the portfolio mix gradually, progressively to a more conservative posture.
Do all that and you should do well or better than well. Should do doesn't mean absolutely certain, but with high confidence it should be good. And an average 6%/year compounded nominal yield would be a reasonable forecast using that strategy (or set of strategies) over that long timespan.
), also his shiller P/E ratio was not particularly high just before the GFC, so its really just another useless indicator.
