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Guarding Your Wealth for Senior Citizens
Retirees Need Investments to Generate Income – Don’t
Settle for Dismal Returns
While everyone else is in a panic and rushing for the
exits, look for opportunities
By Jeffrey D. Voudrie, CFP
 Dec. 13, 2007 - The Federal Reserve cut interest
rates again this week and will be likely to do so again in six weeks.
Yields on 5-year Certificates of Deposit are down to around 4.25% and
falling. On top of that, the ‘mortgage meltdown’ has hindered the
performance of the entire stock market. If you are retired and need your
investments to generate income you don’t have to settle for these paltry
rates and dismal returns. Read on to learn how you can get rates that
are double that!
I have written several articles on various types of
investments that can generate a dependable income stream that is far
higher than that paid by certificates of deposit. I’ve talked about
income deposit securities, closed-end funds, regional telephone
companies and Canadian income trusts in previous articles (you can find
them at my home page on SeniorJournal.com (Click) or at
www.guardingyourwealth.com).
Keep in mind that these types of investments aren’t
guaranteed by the government and their share value will fluctuate from
day-to-day.
Closed-end funds make attractive income-oriented
investments. Think of a closed end fund as a pool of underlying
investments. Those underlying investments can be U.S. corporate bonds,
foreign bonds or even stocks. Something unique to closed end funds is
that they don’t always trade at the same price as the underlying value
of what they own.
For instance, a closed end bond fund may own a pool
of bonds that, if sold that day, would be worth $10 per share. Those
shares don’t always trade at $10. They can trade above or below that
price—at a premium or a discount to the fair market value of what it
owns. Currently, high-quality closed end funds that previously were
trading at a premium are now trading at a discount. Some have discounts
of 10% or more.
One reason why I particularly find select closed
end funds attractive is because the share price has been declining much
faster than the value of the underlying securities.
To me, this is an indication that the decline is a
result of investor panic, not the underlying fundamentals of the fund.
The yields on attractive closed end funds have increased 2-3% with many
yielding in the 9-10% range.
I also like the stocks of select regional telephone
companies. Studies have been done that show how stocks paying dividends
tend to out-perform those that don’t over longer periods of time. That’s
because companies that pay dividends tend to be older and are in
industries where their cash flow is more dependable.
These telephone companies have a steady, stable and
growing cash flow. Think about it. Every month you pay your phone and
cable bill. Things would have to get pretty bad before people allow
their phone and cable to be shut off.
Recent market fears have even caused the price of
these stalwarts to decline. That means you can now get yields close to
10%--or even higher.
Canadian Trusts are popular among those seeking
higher dividend yields. These investments are out of favor due to
changes in Canadian tax laws. Those laws don’t take effect until 2011
though, and even then will only have a limited impact on certain trusts.
Yet the share prices of all of the trusts have
declined as much as those trusts that are adversely affected. That means
that high quality trusts with healthy and growing underlying businesses
are paying unbelievable yields.
A company that prints telephone directories is now
yielding over 7.5% and has already increased their dividend this year.
There are trusts in the oil and gas sector that have shown they can
weather the stress of low natural gas prices. Some are paying over
10%--some even 15%---and still they are only paying out 70-80% of the
money they have available for dividends.
The key with all investments like these is to own
several of them to reduce your risk. The prices will fluctuate.
The prospects of individual companies can change.
That’s why I use groups of these in my clients’ portfolios. For
instance, my growth stock portfolio may utilize 10-15 different
positions like those mentioned here.
So while everyone else is in a panic and rushing
for the exits, I am using this opportunity to pick up investments that
will give my clients a steady and growing source of income for years to
come.
If you have a specific question or would like more
information, give me a call toll-free at 1-877-827-1463 or you can also reach me by email at
jeff@guardingyourwealth.com.
I will answer your financial question FREE.
About Guarding Your Wealth:
“Guarding Your Wealth” is a
nationally syndicated weekly personal finance column written by Jeffrey
D. Voudrie, CFP. Mr. Voudrie is the President of Legacy Planning Group,
a private wealth management firm that employs sophisticated proprietary
strategies designed to protect and grow its clients' investments. Visit his website,
www.guardingyourwealth.com to read past articles under the Guarding
Your Wealth Article Archive that may not have appeared in
SeniorJournal.com.
Guarding Your Wealth for Seniors, on
SeniorJournal.com, is
a collection of columns by Voudrie that deal with issues of particular
interest to senior citizens.
Click here
for all columns.
In addition to being a nationally
syndicated columnist and Certified Financial Planning Practitioner, Mr.
Voudrie provides personal, private money management services to select
private clients
nationwide.
Looking for an energetic expert who
is passionate about financial and wealth management? Mr. Voudrie is an
excellent speaker who will excite and inspire your audience. Mr. Voudrie
is available for a limited number of speaking engagements, television
appearances and radio talk shows. For bookings, email
jeff@guardingyourwealth.com.
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