With bond rates looking bare, income investors are eager to grab greener options. Mitch Reiner offers a few tips to Money Magazine for investors seeking options for their portfolio.
In the Money Magazine article, Reiner suggests that it is possible for investors to get good returns if the limit the amount they invest to 5% to 25% of their portfolio, depending on how much income is needed and whether or not it’s possible to let losses ride during market setbacks. This was Reiner’s response to the current dilemma that many income investors are facing as bonds look bare and they want to grab greener options. According to the article, to get to greener payouts, you have to climb a wall of risk. Historically, when market conditions turn sour, alternative assets lose more money, sometimes a lot more, than traditional fixed-income investments. Some advisors also suggest that income investors recognize that while these alternative assets can help boost your yield, the strategy isn’t a cure-all. Shifting 20% of a portfolio split fifty-fifty between stocks and traditional bonds into a mix of higher-paying alternatives might raise your yield from about 2% to 2.6% with little additional risk.
This article if the first in a series of five articles looking at the most popular bond alternatives and the safest ways to use them to improve your income prospects when rates are low. Adapted from “Reaching for Yield” in the January/February issue of MONEY magazine.
Read the original in Money Magazine here.