UnThreaded | Threaded | Whole Thread (3) | Ignore Thread Prev Thread | Next Thread
Author: Bonroy1924 One star, 50 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 922  
Subject: Income Investing: 5.5% possible? Date: 6/22/2011 12:02 AM
Post New | Post Reply | Reply Later | Create Poll Report this Post | Recommend it!
Recommendations: 0
I am rather new to investing where the primary goal is income.

While there is no "zero risk" investment, does anyone here feel it's possible to achieve a 5.5% yearly return, with a somewhat low risk portfolio?

I'm doing a cursory check of "bond funds" and "income mutual funds" suggested by Money Magazine and it seems that the 10 year annualized return on these things is anywhere from 4% upto 8%.

Seems like a no-brainer...just park money in such funds and 5.5% is easy.

But, something tells me it's not that easy.

With low-risk threshold, is it possible to make 5.5% per year and if so, any suggestions? (I assume conservative bond and income funds would be the primary vehicle, but totally open to stock appreciation, or annuities or any other vehicles)

Thanks, Cb
Print the post Back To Top
Author: pauleckler Big funky green star, 20000 posts Top Favorite Fools Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 907 of 922
Subject: Re: Income Investing: 5.5% possible? Date: 6/22/2011 2:06 PM
Post New | Post Reply | Reply Later | Create Poll Report this Post | Recommend it!
Recommendations: 3
I think you got a pretty good answer over on the Bond & Fixed Income board.

Bond funds have the problem that interest rates now are very low. As rates rise over the next few years, the NAV of bond funds will fall to compensate so new investors get the then current interest rate.

In this situation, you are best off to invest in a laddered maturity bond portfolio. Holding the bonds to maturity, you get the full face value back at maturity regardless of interest rates. You probably want to buy investment grade rated corporate bonds rated A or better. And you want reasonable maturities ideally 7 to 10 years, but maybe out to 15 years for a good quality bond from a well known company.

Any broker can set this up for you. And ideally you might want to get several quotes and compare. The minimum investment is usually $5K per bond, but for diversification, you probably want 5 bonds for a min total portfolio of $25K.

I see that IBM has trust preferred issues paying 6.2%. They are callable soon, but you should be able to get 5.5% on your portfolio. You will probably want to avoid short maturity bonds as often their yields are quite low. But as long as you pick quality companies you trust, you should do fine.

You can also do this with muni bonds if tax free bonds are appropriate in your tax bracket. However, some worry about muni bonds defaulting in these difficult times. That aspect is a bit iffy.

You can also consider common stocks that pay good dividends. At&T is paying 5.6%. Verizon is paying 5.5%. Ameren is paying 5.3%. There are others. Most have a history of increasing dividends from time to time, helping you keep up with inflation.

Post New | Post Reply | Reply Later | Create Poll Report this Post | Recommend it!
Print the post Back To Top
Author: desertdaveataol Big funky green star, 20000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 908 of 922
Subject: Re: Income Investing: 5.5% possible? Date: 6/22/2011 7:59 PM
Post New | Post Reply | Reply Later | Create Poll Report this Post | Recommend it!
Recommendations: 3
I'm doing a cursory check of "bond funds" and "income mutual funds" suggested by Money Magazine and it seems that the 10 year annualized return on these things is anywhere from 4% upto 8%.

It was Money Magazine that talked me into buying my first stock.

It was while invested in that stock that I discovered TMF (The Motley Fool).

It was TMF that taught me the REAL secrets of investing.

It was a good thing TMF did that because the stock Money Magazine had touted nosedived and I lost $10,000 on it.

It would be a good idea to ask yourself "If these funds are doing so well while the market as a whole is doing so badly why isn't everybody invested in them 100%?

It would be a good idea to thumb through Money Magazine and see if you can find a single stock that they think is a bad investment (rots-o-ruck).

It behooves you to continue checking around the boards here at TMF where many of the members are giving out good advice.

It is a good thing you are smart enough to ask around rather than accept the touting of Money Magazine.

You might find it profitable to look around some of these boards:
http://boards.fool.com/dividend-growth-investing-116719.aspx...

http://boards.fool.com/drip-investing-companies-100089.aspx?...

http://boards.fool.com/drip-investing-the-basics-100090.aspx...

http://boards.fool.com/millionaire-fools-113485.aspx?mid=292...

http://boards.fool.com/real-estate-inv-trusts-reits-100061.a...

http://boards.fool.com/the-bmw-method-116681.aspx?mid=293724...

Desert (buys only dividend paying utility stocks) Dave

Post New | Post Reply | Reply Later | Create Poll Report this Post | Recommend it!
Print the post Back To Top
UnThreaded | Threaded | Whole Thread (3) | Ignore Thread Prev Thread | Next Thread
Advertisement