Is the Bond Party Over? Alternative Options to Generate Income

March, 2011

For the past few decades, investment portfolios have been able to generate ample income from traditional, stable fixed income securities (like bonds) without experiencing much downside risk to the value of their principal.  More recently, this has become much more difficult to accomplish.

Simply put, investors are looking for a bond substitute portfolio that has reasonable price stability, is not overpriced, and has an attractive yield.  With interest rates at or near historic lows for bonds, it is very difficult to generate an attractive income stream.  Investors may be forced out on the risk-curve to generate the 5-6% annual yields they have grown accustomed to.  The question is: How can you generate attractive yields without going too far up the risk curve?

This paper examines fixed income investments that have historically paid better yields, but incur more risk.  It also includes a discussion of defensive stocks that may make sense, and factors to take into account when evaluating potential investments.  Finally, the paper discusses allocations of these assets to generate more attractive returns, while attempting to mitigate price volatility (risk).  Click below to order your free copy.

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