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Let's clarify a bit. If you truely believe interest rates are going to rise sharply, preferred stocks are not a good idea. Most have call provisions, but that event is completely beyond your control (although the likelyhood of them actually be called can be estimated by comparing the cost of the pfd interest to the company vs current available funds costs). Bonds are a better buy in this case because at maturity you will get full face value of the bond back--regardless of the market price of similar bonds. In otherwords, rising interest rates may reduce the market value of a bond, but that matters only if sold prior to maturity.

Personally, I do not expect interest rates to rise quickly or very much for the next several years. There is some risk however, and you should calculate the magnitude of the impact on your portfolio before you decide.

A lattered maturity bond portfolio with terms of say 5 to 7 years does the best job of dealing with interest rate changes. Its exposure to this risk is the lowest of fixed income investments after money markets. (The same is true of CD and other investments with fixed maturity dates.) Preferred stocks have a larger exposure.
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