Sentara Spotlight: Portfolio Red Flags
Updated: Sep 10
After reviewing thousands of investment statements over the years, we've identified the warning signs that often go unnoticed—but can cost investors significantly over time.
In this video, we cover the most common red flags we see, starting with the biggest one: portfolios that were never built around a real financial plan. When your investments aren't aligned with your actual goals and timeline, everything else is just guesswork. How many of these red flags are hiding in your portfolio?
Video Recap
The conversation in written form, for readers who prefer it that way
Starting With a Questionnaire Instead of a Plan
Most advisors do not build a financial plan before they invest your money. That surprised both of us when we came into this industry, and it is still the most common thing we find when someone brings us their statements.
Without a plan there is no north star. Nothing establishes when you need the money, how much of it, or what rate of return the plan actually requires. What fills that gap is usually a risk tolerance questionnaire: a few questions about how you would feel if the market fell 45%, and your answers set your allocation.
How you answer depends almost entirely on what markets have done lately. Ask someone in a calm year and ask the same person in March of a crash year and you get two different portfolios for the same life and the same goals.
Picture walking into a doctor's office and, before you describe a single symptom, being asked whether you would prefer red pills, blue pills, or green pills. You pick red because you like red. He writes the prescription. There is a good chance it works out fine. There is a smaller chance it kills you. Nobody would accept that from a physician, and it is a fair description of how a lot of portfolios get built.
The useful question was never how you feel about risk. It is how much risk your plan requires, and whether you need this money next month or in fifteen years.
Diane
Diane sat down with Will at 62. She wanted to retire at 67 and had worked out that she needed about $5,000 a month.
Guaranteed income covered $3,000 of it, $1,700 from Social Security and $1,300 from an airline pension, which is close to unheard of now. That left a $2,000 monthly gap, and her portfolio was supposed to fill it.
Before 2008 she had roughly $500,000 invested. At a sustainable withdrawal rate, that covers the gap. She had already hit her number and did not know it.
Her advisor had her in 95% stocks at 62, with no analysis of when she would need the money. Through 2008 that $500,000 became $260,000. The income it could support fell to a little over $1,000 a month, leaving her short by more than a thousand every month in a retirement she had already earned once.
Markets did recover. What she could not recover were the five years she had left.
Recency Bias Runs in Both Directions
Too much risk near retirement is one version of this. The opposite shows up just as often and gets noticed far less.
Jonathan met with a man in his early forties with enough saved to retire in his mid to late fifties. At some point he had tried trading on his own, without paying much attention to what he was doing, and it went badly. That one experience became his entire view of investing.
He had fifteen to twenty years before he would touch his 401(k), and he was holding almost nothing but cash and bonds. Over a horizon that long, that is its own form of risk. It just never shows up on a statement as a loss.
The International Allocation Nobody Revisited
International beat the US from 2000 through about 2010, which is not surprising given that the period contained the dot-com bust and the financial crisis. Around 2010 and 2011 the large firms responded by moving a lot of client money into international and emerging markets, and a great many portfolios have been sitting that way ever since.
From 2010 through 2024, the S&P 500 returned over 700%. Developed international markets, meaning Japan, Germany, Spain and the rest, returned roughly 36%. Emerging markets, meaning China, Brazil and Russia, returned close to nothing at all. We have had very little international exposure across most of that period.
A client came to us after twelve years with an advisor who had invested this way. They had made almost nothing. When they raised it, the advisor's answer was that at least they were up.
There is also a structural point that gets missed. You already own international exposure through US companies. Coca-Cola takes more than half its revenue from outside the country. McDonald's is over 80%. The large technology companies run 40% to 60%. You get that exposure without the currency risk, the regulatory friction, or the governance problems.
The reason to hold a large dedicated international allocation should be a reason, not an inheritance from a 2011 model. When we see one that has not been revisited in a decade, it usually tells us the rest of the portfolio was built the same way.
Bond Funds That Never Changed
For thirty years you could pick almost any bond fund and earn five to seven percent without thinking about it. That stopped being true when the 10-year Treasury fell under 1% at the start of 2021, which is when we sold out of the standard total-return bond funds.
Rates that low have almost nowhere to go but up, and when rates rise, bond prices fall. The aggregate bond index, the S&P 500 of the bond market, was down 18% including interest by late 2022. The 20-year-plus Treasury fund fell roughly 40%, and close to 44% by late 2023.
People opened statements showing their conservative money down 30% or 40%. The mechanism is the same one that makes a 5% CD worth less the day rates jump to 10%: nobody buys your old rate at full price. The principal is still there at maturity, which is why bonds are called conservative. The risk is entirely about when you need the money.
Rates today are the highest they have been in a long time, which makes bonds genuinely attractive now. That was not true four years ago, and a portfolio holding the same bond funds through that whole stretch was not being managed.
Target-Date Funds
A target-date fund asks one question, the year you plan to retire, and handles everything from there. The concept is sound. The execution varies enormously and almost nobody checks.
In 2008 the S&P 500 fell 37%. Among target-date 2010 funds, meaning money for people two years from retiring, the Oppenheimer fund fell 41%, AllianceBernstein fell 33%, and John Hancock fell 30%. Same label, same retirement year, materially different outcomes, and the worst of them lost more than the stock market did.
Even a fund that works exactly as advertised has a structural problem. Everything sits in one basket, so everything comes out of one basket. In a real portfolio, when markets fall you draw from the stable side and leave the stocks alone to recover. Inside a single fund you cannot do that. Every withdrawal sells a slice of everything, including the part that was about to bounce.
Put a hundred people in a room who are all retiring in two years. Different savings, different spending, different pensions, different tax pictures, different kids. One fund for all of them is not a plan.
Chasing the Highest Yield
Companies that pay a growing dividend year after year are usually strong companies, and we own that profile in client portfolios. The mistake is assuming a bigger yield is a better one.
Yield is the dividend divided by the share price, so when a business deteriorates and the price falls, the yield climbs on its own. A 7% yield is frequently the market saying it expects a dividend cut.
Over the last ten years the S&P 500 returned 237% on price and 298% with dividends. Over the same stretch, several of the well-known high-yielders lost value: Ford down about 6%, AT&T down about 6%, Verizon down 13%, Pfizer down 18%. Dividends pulled them back into positive territory, but the total was a fraction of simply owning the index.
A very high yield on a statement is worth looking into rather than celebrating. It is usually the market pricing a problem you have not read about yet.
None of these ten flags has to apply to you. Most portfolios we review have one or two, and one or two is usually enough to change what your money does over a decade. The list is worth running against your own statement rather than assuming it describes someone else.
Have questions about how this affects your portfolio?
We covered four of these in the conversation. The full list runs to ten, and we put it together as a guide you can work through against your own statements, with a short checklist at the end. You can request it here. If you would rather just have us look at what you are holding, that is what a complimentary review is for, and we would welcome the conversation.
Contact Us at (770) 509-5305 to Begin Your Journey
FAQ: Portfolio Red Flags
What is a risk tolerance questionnaire and why is it a problem?
It is a short survey measuring how you would react emotionally to a market decline, and at most firms it becomes the primary driver of how your money gets allocated. The problem is that it measures feeling rather than requirement. Two people with identical goals and timelines can land in different portfolios based on how the market behaved the month they filled it out.
How much of a portfolio should be in international stocks?
There is no single correct number, but the allocation should exist for a stated reason and get revisited. Many portfolios still carry 20% to 40% international from models built around 2011. It is also worth counting the exposure you already own indirectly, since large US companies frequently earn half or more of their revenue abroad.
Why did bond funds lose money if bonds are supposed to be safe?
Bond prices move opposite to interest rates. When rates rise, an existing bond paying the old lower rate is worth less to a buyer, so a fund holding it marks down. Hold an individual bond to maturity and you get your principal back, but a fund is priced daily on what those bonds would sell for today.
Are target-date funds a bad investment?
Not inherently. They are a reasonable default for someone with no other option, particularly inside a 401(k). They are not a personalized strategy, glide paths differ meaningfully between providers under the same target year, and holding everything in one fund removes your ability to choose which assets you sell when you need cash.
Is a high dividend yield a warning sign?
Often, yes. Because yield rises automatically when a share price falls, an unusually high figure frequently reflects a declining business rather than a generous one. Yields reaching 6%, 8% or higher are worth investigating before buying, since the market may be pricing in a cut that has not been announced.
Another question? Call (770) 509-5305.
Click for Full Transcript
Will: Today we have a treat for you. We often get asked, what are some of the biggest portfolio red flags? Today Jonathan and I are going to discuss these. Let's dive into it.
Will: Hello, my name is Will Allen with Sentara Capital. I'm here today with Jonathan Brummel. We are super excited to talk to you. We recently added Jonathan to the team. He has a long background in the industry. So today, the Sentara Spotlight. We are talking about portfolio red flags. Jonathan, I know this is something that you've paid a lot of attention to over your years when people bring in statements and sit down with you.
Jonathan: Yeah. One of the things we talked about is how we mutually care about the portfolio for clients. That was one of the things when we first started talking. The fact that you were doing videos about the market was huge, because a lot of people in the industry don't even want to be out there saying, hey, this is my prediction, these are my thoughts. Or they just don't know their stuff. So I really like that you put yourself out there that way and that you thought through what's going on with the market.
Jonathan: When we started talking and going through the videos, we were saying, why is this important? Why should our clients care that we do the market updates? So I'm really excited to talk about this with you and get your thoughts and ideas. These are things that you've been doing and I've been doing for years and decades now, but it's lifting up the lid a little bit and letting you see what we're looking through when you come sit with us. What have we seen? What are the good, the bad, the uglies? We've seen all kinds of things over the years. What are they, and why should you care?
Will: Absolutely. So today we're talking about portfolio red flags. We want to mention, and this is exciting, that you can click the link in the description or go to sentaracapital.com, right on the front page, and subscribe. We will email you a document covering the biggest portfolio red flags. We're going to cover three or four of them today. There are more in the guide.
Will: With that, let's start with the biggest red flag. One of the things that jumped out to both of us when we got in the industry is that most advisors, when they sit down with a new client, don't do a financial plan.
Jonathan: And why does that matter? Because then there isn't a north star to guide how we're investing your money. We use benchmark terms in the industry, what's the S&P 500 doing, what's international doing. But we have to have a barometer of where we're at, where we're going, and how we're measuring ourselves. That all starts with when you need the money and what your timeline is. Most people don't do that. For most advisors it's about a product. There are some great products out there and they can be appropriate for the client, but most of the time they're out there trying to position a product, not an actual purpose.
Will: That's absolutely true. And I think we have an example to walk you through of how damaging this can be if an analysis is not done. This starts with a woman named Diane. This was a real-world example. She sat down with me and said, I'm 62 years old, I want to retire at 67. When she went through her income needs, she decided she was going to need about $5,000 a month.
Will: When we did a breakdown of her income, she had Social Security at $1,700 and an airline pension at $1,300, which you don't encounter that often these days.
Jonathan: No, it's unheard of really now. They went to 401(k)s back in the late '80s, I believe. And by and large most companies don't have any kind of pension, so you're stuck with Social Security or your investment portfolio.
Will: That was basically all she had. She did have a pension, that was nice. But even with the pension she had about a $2,000 a month shortfall. So I asked her, tell me about your investments. What's there to fill the gap? And she said, Will, that's one of the big reasons I'm sitting with you. She said, prior to 2008 I had around $500,000 in an investment portfolio.
Will: And I said, that's great, because with that you could draw over $2,000 a month and fill that shortfall. In other words, she had met the goals she had set for retirement. But the advisor didn't do that analysis, had her in 95% stocks, and that $500,000 portfolio dropped to $260,000 in the year 2008. That drops the income down to just over $1,000 a month. Now she has a shortfall of over $1,000 a month. Unfortunately, this is a case we have seen time and time again.
Jonathan: We see it all the time. It's putting time horizons on your money. What we're trying to do as financial advisors is make sure that if you're set to retire in a couple of years and 2008 happens again, because we can't ever fully predict the market, are you still set up for success? Can you still retire in two years?
Jonathan: The worst thing, and this is what hurt a lot of people back in '08 and '09, is they weren't quite ready to retire but they were getting close, and they were too risky. They were too much in the market because everything's going up, so why not be in there? Then the market corrects on them right when they're supposed to retire, and guess what, there were layoffs. They were forced into early retirement and all of a sudden they're scrambling, having to take from portfolios that are down 45%.
Will: We also see a lot of the opposite side as well, especially because you came from the bank side recently and you were telling me about people who were very young. Do you want to give that example?
Jonathan: Yeah. We were talking earlier about recency bias. Recency bias is whatever your last experience has been. It ingrains in you and that's how you see the world. It starts to become your worldview.
Jonathan: I was meeting with a guy in his early forties who could retire potentially in his mid to late fifties by the amount of money that he has. But at one point he decided he was going to play the market. Everyone else was doing well. He tried it and it burned him, because he didn't do it right. He was just kind of playing around, wasn't paying attention. It tilted his viewpoint and all of a sudden he didn't want anything to do with stocks. So you have this young person who has 10, 15, 20 years before he'd even touch his 401(k), and he was holding cash and bonds. He had almost nothing in the market. It was terrible.
Will: And speaking of recency bias, that brings us to the risk tolerance questionnaire. This has been an industry standard basically since the '90s when I started and all the way through. A new investor sits down and is asked questions about how much risk they can tolerate in their portfolio. What we have found over the years is that how somebody answers is going to depend on what the markets have done recently.
Will: That's not a way you would want to make other key decisions. If you walked into a doctor's office and before you started talking about your symptoms they said, hey, I've got a question for you, do you want red pills, blue pills, or green pills? You'd think, what? That's an odd question. And you'd say, well, red's my favorite color, so I guess I'll go red. They write out a prescription, hand it to you and say, start taking this medicine. Very good chance you're going to do well with it. Pretty good chance also it may not work and you'll die from it, but that's a smaller chance than the good happening.
Jonathan: Right. We would never be okay with that.
Will: But that's exactly what we're doing with the risk tolerance questionnaire. It's how do you feel about the market, and that guides how we invest your money.
Jonathan: When I was in the banking world and private banking, when we did the financial planning they might ask some of the right questions. What are your goals? What are your objectives? But very quickly it's followed up with, well, what's your risk tolerance? If the market drops 45%, are you going to be okay with that? Will, if your portfolio dropped 50%, would you be okay with that?
Will: No, I would not be okay with that.
Jonathan: So we're all in agreement. We wouldn't be okay with that. We'd probably be freaking out a little bit. But it's all context. Why are we down? What are we trying to do with this money? Do I need this money next month to pay for my house bill and I'm down 50%? Or do I need this money 10 years from now? The risk questionnaire doesn't do that.
Jonathan: They ask the right questions about your goals and objectives, I want to take a vacation, leave money to my kids. But then they let it all be dictated by risk tolerance, not by, hey, because this is what you're trying to accomplish, we need to take a little bit more risk with this part of the portfolio. Or because of what you're trying to accomplish, we actually need to pull back and not be as risky, because you need the money sooner than that. We see that all the time. When we start matching what the portfolio mix is against what it's supposed to do, we see huge disparities.
Will: So the main takeaway here, and we're going to cover some other portfolio red flags, is that right off the bat, if you have not had a retirement plan or a financial plan done, and if your allocation is dictated by a risk tolerance questionnaire, that is a major red flag.
Will: Now we're on to red flag number two, and what we're talking about here is following outdated industry rules of thumb. Our first focus is an over-reliance on investing internationally. This became very popular back in 2010 and 2011, after international outperformed the US from 2000 to 2010. You had the dot-com bubble and then the financial crisis, two different selloffs of over 50% in the stock market. International did a little better. So all of a sudden BlackRock and Merrill Lynch and all the big firms decided that everybody who has stock market exposure needs to have a lot of that in international stocks.
Jonathan: And that's one of the things as we're talking through these red flags. These are things that when we go through a portfolio, we can quickly say, if you have this, what else might be wrong? It's the canary in the coal mine, so to speak. If you have a ton of international stocks, which we see all the time in portfolios, that probably means they're using a very cookie-cutter portfolio, something very standard in the industry. It's a canary in the coal mine that they're not being very intentional about how they're directing your investments and therefore your future.
Will: In 2010 and 2011 is when it became really popular to move a lot of your money into international. Here at Sentara, if you look over the last 10 to 15 years, we've had very little to no exposure for most of that period of time. If we take a look at the returns on your screen, from 2010 through 2024, that's a 15-year period, the S&P 500 is up over 700%.
Will: If we compare that to emerging markets, up basically nothing. You have made virtually no money being in emerging markets. Emerging markets, we're talking about China, Brazil, Russia. Those were very popular investments along the way. And then we also have international developed, so we're talking about Japan and Germany and Spain, a lot of the developed markets. You can see you have made around 36% in 15 years.
Will: So someone who has been loaded up with international and emerging markets has dramatically underperformed. And this has been very popular with advisors who like to stick to just four or five funds in client portfolios. We recently had a client of ours whose advisor had invested this way for a long time. They said, we had met 10 or 12 years and made almost no money at all. They asked the advisor about it and the advisor was basically proud, saying, well, at least you're up.
Jonathan: And that's what we don't want, right? This is your hard-earned money that's going toward your goal of retiring early, giving to your kids, whatever that looks like. This kind of underperformance is terrible.
Jonathan: The thing is, a lot of the S&P 500 companies, which people are already invested in through their 401(k), are international companies. That's how it has morphed over the years, especially starting in 2000. Most of these technology companies get 40, 50, 60% of their revenue from international. Coca-Cola is at like 51% plus that comes from international.
Will: You mentioned McDonald's, over 80%.
Jonathan: Which is like the American brand. All these companies are getting so much of their revenue internationally already, and you barely have to deal with the rules, regulations, currency exchange. So why are you adding the extra international, which has underperformed? It just makes it worse, because a lot of times the best companies in the world are still US companies.
Will: For why the US has dominated, a big one is lower corporate taxes. Corporations like to be here. We also have less of a regulatory burden. I was over in Europe each of the last two summers, and it's just crazy to see all the rules and regulations and red tape over there. When you talk to people, they say, look, I'm not going to start a company because it's too hard. There are too many things I have to deal with.
Will: The other thing is, what has been the best sector over the last 15 years? It's been tech. And if you think of the biggest and best-run tech companies in the world, Microsoft and Apple and Amazon and Google, they're all here in the US. If you think about who in Europe or Asia are the big tech companies that have done really well, it's hard to find any that compare. So of course it makes sense to invest more in the US. And you make a great point, you already are getting international exposure when you own these US companies. Why overweight by having an extra 20, 30, 40% in international stocks?
Will: There is another red flag that quite frankly used to be something no one had to worry about at all, which is taking a look at your bond performance. The truth is, in the '80s, the '90s, the 2000s, you could throw a dart at a dartboard with all the bond funds out there and you'd make five, six, seven percent per year most of the time. It didn't take a lot of work. Then things changed when COVID hit and interest rates went down to near zero.
Will: We have a chart here looking at a bond mix from 2021 up until recently. At the start of 2021, that is when we made the decision to sell out of the typical total-return bond funds. These were popular funds where you could make four, five, six percent. But at the start of 2021 interest rates are under 1% for a 10-year Treasury bond. When those rates go higher, and they can't go much lower than that, bonds can lose money.
Will: On the chart we have the aggregate bond index, that's the equivalent of the S&P 500 or the Dow Jones for the bond market, in purple. In orange we have the 20-year-plus US Treasury bond fund, because let's face it, this paid a little bit higher interest rate. So you had a lot of people at or near retirement whose advisor said, let's buy some of these other bonds and make a little bit higher interest rate.
Will: This chart is looking at how far off the high the bond is, including the interest you receive. So you're getting your interest, but these fell so far in price. By the time we get to late 2022, the Barclays Aggregate bond index is down 18%. And if you take a look at the longer-term US Treasury bond fund, it's down around 40%, and went on to drop almost 44% in late 2023. I know you experienced this as well. There were people who got their statements, saw they were down 20, 30, 40% in their bond funds, and had heart attacks.
Jonathan: Oh yeah, it's supposed to be conservative. So let me go to why bonds 101. How does a bond work, and why do advisors use bonds? It's considered a conservative investment, and the reason is that the principal is guaranteed. It's not a CD, but it responds somewhat similarly to a CD, with caveats.
Jonathan: I would explain this to my bank clients. If you had a CD from a bank paying 5%, you put $100,000 in it. The next day you walk out, interest rates change on you, and all of a sudden that same bank is paying 10% on that same CD. You have 5%. Well, if that 5% pays your bills, you can just hold it, you're fine. But if I wanted liquidity and said, hey, Will, will you pay me my $100,000 because I'd like to get some cash out, you're not going to pay me $100,000 for 5% when you can just walk into the bank and get 10%. You're going to have to discount it. So I might have to take a little bit of a loss.
Jonathan: Now, the principal is still guaranteed by the bank, so you're not going to lose your shirt, but that's why it has some drops. You take that same concept, multiply it over 5 years, 10 years, and even a 1% change over a 10-year period means you might make an extra 10% or lose an extra 10% on long-term bonds. If we're at good interest rates, that makes sense. We're at the highest rates we've seen in the longest time on the 10-year. But back a couple of years ago, that was terrible. You were setting yourself up for disaster.
Jonathan: So by being proactive with clients and thinking through this, it helps avoid some of these pitfalls. The underlying guarantee from these companies is why these are considered conservative. But the market metrics, and going back to your timing point earlier, the timing of when you need the money is what gives it the risk. Being smart about your conservative investment makes a ton of sense.
Will: So red flag number two, when we take a look at a portfolio, if you have had a large allocation to international stocks over the last few years, that has been a red flag. And if you have been in these same kinds of bond funds for the last four or five years consistently, that has not been good management. That is a red flag as well.
Will: Red flag number three, owning target-date funds but not knowing how they work. This concept evolved because for a long time in 401(k) plans, employees weren't sure which funds to invest in. So they would pick a fund or two or three up front and never make any changes the rest of the way. All of a sudden the industry decided, let's build a fund where someone can say, here's when I'm planning on retiring, all I have to do is buy the one fund, and as I get older it gets more conservative to try to match when I'm retired.
Will: Here's the problem. Every fund company has much different allocations for how to best get that done. What really hits this home, and we keep going back to 2008 because it's the best illustrator, is that in 2008 the S&P 500 dropped 37%. The target-date 2010 retirement funds, so if you were two years away from retirement, the Oppenheimer target-date fund for 2010 dropped 41%. AllianceBernstein down 33%, and John Hancock down 30%. These are massive losses. If you were two years away from retirement and you had these kinds of losses, all of a sudden your retirement goals are turned upside down.
Will: The problem is that even today, if you go to a Fidelity or Vanguard or any of these companies and you buy one without doing an X-ray look at how they allocate the money, you're going to get different outcomes.
Jonathan: Let's say one worked perfectly. Let's say it went from aggressive to conservative correctly right when you were about to retire. The problem with these funds is that you're putting all your eggs in one basket, and therefore you're taking it all out of one basket. Let's say on your own you'd still be 50% stocks, 50% bonds. The market drops. Typically bonds don't drop as far as the market does. So when you need money for retirement, you go to the bonds that are being stable, which is how we set up different portfolios. You go to the conservative stuff that doesn't move and you pull it out from there. But if it's all in one basket, that means you're forced to sell out of stuff that could bounce back really well just to get at the stuff that's staying stable. So even if it worked perfectly, it doesn't work perfectly. The concept is good, but how it's actually implemented is very flawed.
Jonathan: And then you have clients where they have a 401(k) here and an old 401(k) there. These fund managers all manage them differently. Some of them are good, some of them have performed really well the last couple of years. So it's not that they're bad, but they're set up differently. One company has a ton of international, one has very little. It's all across the board, and there's a lack of transparency about knowing what it is. If you looked it up, usually with, say, AllianceBernstein, inside of it is probably all of the AllianceBernstein stuff. So you have AllianceBernstein large cap and small cap and international, versus potentially just getting the best one in each category, or again, whatever is right for the plan you're going to do.
Will: Add to that, if we got 100 people in the same room and they all said, hey, we're retiring in two years, they are all going to be much different. One's more frugal, one likes to spend more. What their other assets are, what their Social Security may be. These are different. Yet we're saying use the same fund for all these people. That doesn't work well. So if all the money's in one of the target-date funds, that's a red flag.
Will: Red flag number four, and we're talking about dividend-paying stocks. We want to be clear that oftentimes companies that pay dividends and are increasing those dividends on a yearly basis, that is often a sign of strength. We have the Vanguard Dividend Appreciation ETF in client portfolios. It has companies like Microsoft, JPMorgan, Eli Lilly, Visa, Johnson & Johnson, Walmart. Companies everyone knows that have been around a long time.
Will: However, the mistake comes in when people start to think the higher the dividend, the better. Most of these companies are paying 3% or 4% of their share price. Another thing we've noticed is that as time has gone by, there have been companies that try to take advantage of this. They sell the idea that you can come buy a fund that's not publicly traded that's paying six, seven, eight percent. People think that's really good. The problem is when you look under the hood, there can be trouble.
Will: We have some examples. Ford Motor, AT&T, Verizon, Pfizer. These are companies over the last 10 years that have had high-paying dividends, five, six, seven percent. The higher it gets, it's basically the market saying, we think you're going to be cutting your dividend.
Will: Let's take a look at their returns over the last 10 years. The S&P 500 before dividends is up 237%, with dividends 298%. So that's an example that dividend income has been nice, that's added to your return. But if we take a look at those other companies, Ford Motor over 10 years, the price has actually declined 6%. AT&T down almost 6% as well. Verizon down 13% and Pfizer down 18%. So yes, with the dividends you've gone into positive territory, but you've made a fraction of what you would have made in the S&P 500. And if we put the Vanguard dividend fund in there, it's up well over 200%.
Will: So that's an example of what we like. We want to own companies that are paying good dividends, but we are not out looking for the highest-paying dividends. That is normally a major trap. And if you see that on your portfolio statement, that's a red flag.
Will: That is a wrap on the most important portfolio red flags. But just a reminder, we have a longer list, because there are other flags as well. You can click the link down in the description or go to sentaracapital.com and sign up on the homepage. We will send you the list, and there are a lot of important ones in there.
Will: We also want to mention that if you are new to Sentara Capital and you'd like us to look over your portfolio statements, go to sentaracapital.com. You can go to the contact page and reach out to us. We'd love to have a conversation. Thanks for watching and take care.
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