Income Investing: Selecting A Good Appropriate Stuff

When is 3 percent better than six percent? Yeah, we all know the response, but only until the prices of the securities we presently own begin to fall. Then, logic and mathematical acumen disappear and we become vulnerable to all kinds of special cures for the periodic onset of greater interest rates.

We'll be told to sit in cash until rates stop rising, or to sell the securities we own now, just before they lose much more of their precious Market Value. Other professionals will suggest the purchase of shorter-term bonds or CDs to stem the tide of the observed erosion in portfolio values.

There are two significant things that your mother never told you about Income Investing: (1) Greater rates of interest are excellent for investors, even better than lower rates, and (2) Selecting the right securities to benefit from the interest rate cycle is not particularly difficult.

Greater rates are good for investors, particularly when retirement is really a factor within your investment decisions. The more you get for your reinvestment dollars, the more likely it is that you won't require a second job to maintain your standard of living.

Picking the right securities to take advantage of the interest rate cycle isn't particularly challenging, however it does require a change in focus from the statement bottom line and the use of a few security types that you simply may not be 100% comfy with.

I'm going to assume that you are familiar with these investments, each of which might be considered (from time to time) for a spot within the properly diversified Income Portion of your Asset Allocation:

(1) The traditional individual Municipal and Corporate Bonds, Treasuries, Government Agency Securities, and Preferred Stocks.

(2) The Unit Trust varietals, Closed End Funds, Royalty Trusts, and REITs.

The market rules that apply to these are fairly predictable, but the ability to create a safer, greater yielding and flexible portfolio can vary drastically within the security types.

So do a little research and spread your dollars around the numerous management companies that are on the market. If your adviser tells you that all of this is risky, tell them to look into corporate debt restructuring just before you restructure your investment plans.

For the time being, keep doing your own personal research on restructuring finance and investment plans to yield excellent returns.

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