When is three percent better than 6 percent? Yeah, we all know the answer, but only until the prices of the securities we presently own begin to fall. Then, logic and mathematical acumen go away and we become subject to all kinds of special cures for the occasional onset of greater interest rates.
We'll be told to sit in money until rates stop soaring, or to sell the securities we own now, before they lose even more of their precious Market Value. Other specialists will suggest the purchase of shorter-term bonds or even CDs to stem the tide of the apparent erosion in portfolio values.
There are actually two critical issues that your mother never ever told you about Income Investing: (1) Higher interest rates are excellent for investors, even better than lower rates, and (2) Choosing the right securities to reap the benefits of the interest rate cycle just isn't particularly difficult.
Greater rates are excellent for investors, especially when retirement is a factor in your investment decisions. The more you get for your reinvestment dollars, the more likely it is that you will not require a second job to maintain your way of life.
Choosing the best securities to reap the benefits of the interest rate cycle is not particularly difficult, however it does require a change in focus from the statement bottom line as well as the use of a few security types that you simply might not be 100% comfy with.
I'm going to assume that you simply are familiar with these options, each of which could be considered (from time to time) for a spot in the properly diversified Income Portion of your Asset Allocation:
(1) The traditional individual Municipal and Corporate Bonds, Treasuries, Government Agency Securities, as well as Preferred Stocks.
(2) The Unit Trust varietals, Closed End Funds, Royalty Trusts, and Real Estate Investment Trusts.
The market rules that apply to most of these are fairly predictable, but the capability to produce a safer, higher yielding and flexible portfolio varies significantly within the security types.
So do a little analysis and spread your dollars around the numerous management firms that are available. If your agent tells you that all of this really is risky, tell them to look into corporate debt restructuring before you restructure your investment plans.
In the meantime, keep doing your own personal research on restructuring finance and investment plans to yield exceptional returns.
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