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Hey muchka:

One of the cardinal rules I apply when investing for income is diversify, diversify, diversify. There are so many different options out there for investing for income, and all of them react in different ways to different market events. There are corporate bonds, government bonds, municipal bonds, money-market funds, CDs, senior notes, mortgage-backed securities, REITs, preferred stocks, and then most of these can be had either domestically or internationally. Some have higher yields (and more risk) and some have lower yields (and less risk).
Myself, I try to hold a healthy mix of some of the higher-yielding choices among these, figuring that if one thing like a REIT turns bad, everything else won't tank along with it. But I am relatively young and don't actually "need" the income to meet current expenses. And yes, I have had a couple of companies reduce or eliminate their dividends on me.
For a person who needs current income, that may not be the wisest choice. Someone in that situation may want to stick to money-market funds, government bonds, CD's, and high-quality corporate bonds, perhaps with a tiny bit of a higher-yielding choice thrown in.
My own recommendation to my grandmother was as follows: 1) A good chunk of her money in a money-market fund. 2) Another good chunk in a total-bond-market index fund. 3) A little tiny bit in one or two high-yielding equities like a REIT or preferred stock.

Hope that helps!

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