So Lack’s book also offers alternatives to bonds, that is buying shares of companies that pay good dividends. His criteria for selection are:
- History of high dividends (duration in terms of decades and even in spite of bear markets)
- usually diversified
- often profits are larger than company’s reinvestment (in other words not a growth stock)
- low volatility (overall market beta = 1.0, choose beta less than 1.0. But the danger is when there is false correlation between the company’s beta and the market’s beta)
More research and analysis needed…
[A stock with lower volatility sees smaller share price declines when the market falls. Low volatility may also temper share price appreciation on the way up.] Lawrence Carrel. (2010). Basic Advantages of Dividend Investing. http://www.dummies.com/how-to/content/basic-advantages-of-dividend-investing.html. Dividend Stocks For Dummies. New York. Wiley Publishing.
Robert Laura. (29 Sep 2013). Three Easy Ways To Select and Compare Dividend Stocks. http://www.forbes.com/sites/robertlaura/2013/09/29/three-easy-ways-to-select-and-compare-dividend-stocks/#6fc5e2872cd3. Retirement, Forbes.