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BruceCM: "Although I subscribe to Mathew Emmert's Motley Fool Income Investor, I don't recommend him. Despite the name, he is not an income investor... he is a growth-and-income investor. Now, if you don't mind helping your parent's periodically rebalance and sell stocks for gains, then Mathew's approach may work for them. But for pure income investors who don't want to try and time the market this way, his typical security yields are in the 1 to 3% range...usually not enough income for most."

Hello Bruce,

Actually, some of your comments here are not entirely accurate. Please allow me to clarify: Though it is true that I recommend a broad range of securities in Income Investor, the average yield on the core selections recommended in its pages is nearly 5%. Indeed, I generally pursue a minimum 3% yield for the two main recommendations provided each month. Also, the supplemental investments recommended in our Cash Flow Corner feature often boast yields that are higher still.

We most definitely incorporate certain growth criteria into the Income Investor philosophy, as this is a critical factor for all readers that hope to outpace the corrosive effects of inflation over time. As I've explained in the newsletter, the fact that the tax rate on dividends is now equal to that of capital gains (i.e. 15%) means there is little difference between funding ones income needs with interest and dividends alone, or a combination of interest, dividends, and capital gains. Further, this strategy in no way advocates market timing, as modest, periodically scheduled liquidations -- coupled with a large emergency fund that can be tapped in prolonged bear markets -- will eliminate that risk.

You provide some excellent information in the remainder of your post, and I'm largely in agreement with your favored sectors. However, I would disagree with some of the broad assertions you make on the "avoid" side -- specifically regarding mortgage REITs and closed-end mutual funds.

Though I generally don't recommend the typical investor allocate more than 5% of their total portfolio to mortgage REITs, there are select firms in this sector that have proven their worth and demonstrated the long-term viability of this business model. And, the yields in these select cases are substantial enough to enhance the overall income level of one's portfolio despite the modest amount of exposure to the sector.

I'm not sure what prompts you to state that all closed-end mutual funds are doomed to a dividend cut, but I see little merit in such a statement. There are many closed-end funds -- some of which I've recommended in the pages of Income Investor or in II Special Reports -- that have long-term track records of reliable, and growing, dividend distributions.

Finally, your statement about immediate fixed annuities having no residual value is not always accurate. There are often many options associated with these investment products. Not the least of these are a survivor's option for one's spouse or respective heir, and options for guaranteed minimum distribution amounts -- though, of course, choosing such options would lower the amount of one's annuity payments.

Just to be clear Bruce, I'm not trying to take you to task here, as you've provided some insightful commentary in this thread. I simply wanted to address your comments as they specifically related to Motley Fool Income Investor.

Foolish Best,
Mathew Emmert (TMFGambit)
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