Quote:
Originally Posted by retiredguy123
FYI, here is a link to the Vanguard Investments Utility ETF offering. The current yield is 2.88 percent, but the risk level is rated as 5 out of 5.
Vanguard ETF Profile | Vanguard |
The risk level is based upon volatility ranking, which is the co-variance with the market. It is not a fundamental analysis of the industry. If the market index is based upon technology stocks, utilities are the old school, steady but lower growth, and definitely not sexy nor high risk as far as guaranteed rates of return. But ask yourself, what is the world of tech based upon? electrical communication. . . . and what is the latest political populist agenda? green energy. . What's the hardest industry to analyze because its regulated with a completely different basis of competition? utilities. . . I work in one, and see all the commercial finance people come from GE, high tech, etc, and just have a very difficult time re-orienting themselves to the industry, because of its uniqueness of a regulated monopoly.
The offset is that the dividends are tax free, and the industry is guaranteed a return on assets, which will increase with the capex of upgrading the grid for electrification. Its a long term play, for sure. And utilities are not sexy. . there are other reasons which analysts may give more weight which are industry specific and transitory. . there is an interest rate risk which is the overriding risk, as the stock with a stable growth and high dividend rate, has a large influence on interest rates. . . similar to bonds, but it has the ability to grow revenue versus a bond. . .
Vanguard definition of their risk rating:
Vanguard funds classified as aggressive are subject to extremely wide fluctuations in share prices.
These funds may be appropriate for investors who have a long-term investment horizon (10 years or longer). The unusually high volatility associated with these funds may stem from a number of strategies.
This is not an industry analysis, this is a mathematical analysis as its a difficult industry to understand versus commercial companies. Which is why I recommended it for the reasons above, its the going forward basis of investment with the government, and is becoming more important for all technology to exist. . . which a retired person should consider when not wanting risk but a nice return.
good luck, its an internet bulletin board with world wide participants, so you have to get through the
to find a nugget of wisdom. . . this may be one, or may not be, only time will tell. Maybe this is the time for the millionaire to have a meeting with a CFP. . .
sportsguy