Q: Any advice for people about where they should invest going forward?
A: Stock returns basically come down to dividend yield plus earnings growth. If you have a dividend yield of 2 percent, plus earnings growth of 5 percent, I think a 7 percent annual gain is a rational expectation for stocks.
I think it’s unwise to get out of the stock market, or the bond market, even though the economy is uncertain. The market is often stupid, but you can’t focus on that. Focus on the underlying value of dividends and earnings.
Q: Where do you like to give back?
A: I tend to give to those who have helped me along the road of life: Blair Academy, Princeton University, our church, and several hospitals that got me here in one piece. On the community side, I’ve always been a big supporter of the United Way. The best rule for philanthropy is to give until it hurts, as much as you can, because none of us can get through life all by ourselves. As John Dunne wrote, ‘No man is an island, entire of itself.’
My retirement accounts are more like a 50-50 split between stocks and bonds, because of a longer time horizon and because yields on bonds are extremely unattractive right now. The equity side is mostly in Total Stock Market Index (VTSMX), but I still have a little bit in the Wellington Fund (VWELX), which I’ve been investing in for many decades. I don’t ever want to sever that relationship. Bonds in my retirement accounts are about 30 percent Treasuries and 70 percent investment-grade corporates, like the Vanguard Intermediate-Term Corporate Bond Index (VICBX).
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