Yield stocks will continue to yield but further capital gains might be limited

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Key points

  • A person who invested $100 in an index made up of ‘high-yield’ stocks at the start of 2011 would have made just over 40% more than a person who invested only in an index made up of all other stocks.
  • But going forward, the future for high-yield stocks might not be as good as the historical long run.
  • An investment in overseas equities – via the unhedged ETF representing the S&P 500 (IVV) – has paid off over the past six months.

Following the February/April bubble in the four high-yield sectors (financials, property, telcos and utilities), the relative outperformance to the seven other sectors fell by nearly 5% points.

High-yield delivers to date

However over the long-term, they are still well ahead and I conducted the following experiment with indexes to illustrate.

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