Income Securities

[Andrew Banas]

TEXTI am not retired but I plan on becoming financially independent in a few years...if all goes as planned...(yeah, right). Anyway, I have been subsribing to the Forbes/Lehmann Securities Investor newsletter for over a year and I must admit that the approach of the editor is quite compelling. He touts mainly preferred stocks and corporate bonds. I won't get into the details of his strategy and concepts, but I will say that he creates four separate income producing portfolios based on 10 securities each, mainly preferred stocks. I have bought only a few of his picks but none of have gone belly up. Some are returing over 13%. His portfolios are performing as advertised. The idea is not to be overly concerned about the market value of the securities as long as the associated companies remain solvent and make their scheduled payments. I compare this concept to a owning a multi-family house for rental purposes. Who cares what the real estate value of the home is if you are planning to own it for 5- 10 years and returns your target income? Its worth a look anyway.

 

[Michael]

There are many newsletters. Before commiting heavily to one of them, be aware that it may be possible to look up the long term record of many of them, and compare relative performance versus other letters and the market indexes, by looking up their ratings in the Hulbert Financial Digest at your library. Mark Hulbert has been tracking the performance of a large number of newsletters for a long time.

 

[tjon72]

I
think this idea is what I am doing. I aim for 10% + or - as a return. So far, so good. I know this is not accounting for inflation, but, I figure by reinvesting the excess (10%-4% safe) I will be covered. Any comments appreciated. Oh, I have been retirededed for 1 yr.

 

[Mr._johngalt]

This is kind of what I am doing also (no common stocks)
and I've been happy so far. I have some stuff that
will not mature until after I'm dead. But, as long as I
get the income........................I had good luck with
preferred stock also (same idea). It's a comfort to watch the market jumping all over the map while you just keep getting those checks every month.

 

[Michael]

Not everyone has the temperament to calmly watch their portfolio fluctuate wildly in value. For those who do, the odds based upon the historical record favor the inclusion of a certain percentage of common stocks in a portfolio. The advantages of including a percentage of common stocks include a potentially higher safe withdrawal rate for younger retirees, and the possibility of a significant future increase in one's portfolio size. The cost is increased volatility. It all depends upon one's age, health, temperament for risk, and what percentage of one's portfolio needs to be withdrawn per year to live on. I can see where older retirees with a very low tolerance for risk might not want to take the risk in return for the potential of uncertain future increases in portfolio size. Younger retirees need to consider the possibility that they may be around for 50 more years. Some of them might be better off limiting their early withdrawals to as low a percentage of their portfolio as is comfortable, and investing a portion in common stocks to give their portfolio the possibility that it may grow in the future.

Everyone has to make their own decision. There are no guarantees in life. We can only look at the situation, and make our best guess.

 

[Mr._johngalt]

Hi Mike! Agree with your thoughtful analysis.
However, if I was 38 instead of 58, I still would not
own common stocks under any circumstances. What
I need is predictability. Common stocks don't offer that.
Life is uncertain enough. Why add to it?