Where in the Markets Can you Get Better Returns?

Each week, the Charlie Bilello Week in Charts email includes a ton of interesting economic and financial information. Recently, a set of asset yields caught my attention. Here are the reported yields on the five major U.S. asset classes:

• Bank of America U.S. Corporate Bond Index: 5.07%
• 30-Year Treasury Bond: 4.78%
• S&P 500 (forward earnings yield): 4.45%
• 3-Month Treasury Bill: 4.30%
• 10-Year Treasury Bond: 4.23%

The spread of less than one percent between yields across the classes is a record low. As recently as three years ago, the spread between the highest and lowest yields was over five percentage points.

I interpret this data to mean that with a traditionally diversified investment portfolio, your expected near-term returns (over the next year or two) will likely be less than 5%. Of course, the stock market could do much better than the forecast for earnings growth. But then it could also do a lot worse. The bond asset yields are pretty locked in.

I am pretty sure that you would like to see your investment portfolio yield a return of more than 5% over the next year.

As an alternative portfolio strategy, let’s look at my Dividend Hunter service. With the Dividend Hunter, I provide a recommended portfolio of high-yield investments, including REITs, BDCs, and yield-focused ETFs. I discuss with subscribers the importance of building a high-yield income stream. You can count on dividend income, unlike the uncertainty you get from share prices. As Dividend Hunters, we track quarterly dividend income, which, if you follow my guidance, will be stable and growing.

I divide the Dividend Hunter recommended portfolio into three categories:

• Stable Dividend Investments are stocks and ETFs that pay steady and growing dividends. You can count on the income from this category. The current average yield is 8.8%, which appears significantly better than the yields listed above.
• The Variable Dividend Investments category has a current average yield of 14.3%. However, these yields do vary, sometimes significantly.
• The Fixed Income Investments category consists of individual preferred stocks and high-yield bond ETFs. The average yield for this group is 7.6%.

Putting it all together, my largest account, which is a qualified retirement account, is 100% invested in the Dividend Hunter recommendations. The income grows every quarter, and based on the 2025 second quarter earnings, the account has an annual yield of 10.1%.