Sooner or later, except for a Japanese-style deflation, interest rates will
rise from their current historic low levels. That will cause bond prices to
fall. Even if bonds are held to maturity, interest would be below market. Rising
interest rates, moderate inflation and a growing economy are bad for bonds
and good for stocks. As stock earnings rise, so do dividends.
Given the increased uncertainty about markets in recent years, given that
most of our clients have completed the accumulation stage of their financial
lives, and given the great run we have had with bonds, we think a tilt toward
cash income from stocks with somewhat less reliance on bonds and capital gains
is the prudent thing to do. A bird in the hand may be worth two in the bush,
if the things fall apart again.
Disclaimer: Opinions expressed in this material and our disclosed positions
are as of July 5, 2010. Our opinions and positions may change as subsequent
conditions vary. We are a fee-only investment advisor, and are compensated
only by our clients. We do not sell securities, and do not receive any form
of revenue or incentive from any source other than directly from clients. We
are not affiliated with any securities dealer, any fund, any fund sponsor or
any company issuer of any security. All of our published material is for informational
purposes only, and is not personal investment advice to any specific person
for any particular purpose. We utilize information sources that we believe
to be reliable, but do not warrant the accuracy of those sources or our analysis.
Past performance is no guarantee of future performance, and there is no guarantee
that any forecast will come to pass. Do not rely solely on this material when
making an investment decision. Other factors may be important too. Investment
involves risks of loss of capital. Consider seeking professional advice before
implementing your portfolio ideas.
IMPORTANT NOTE: We are a Registered Investment Advisor. We do not sell
investments or control client assets. We are professional advisors compensated
on an hourly basis or flat fee basis for portfolio management or for our coaching
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guidance tailored to their specific needs. Newsletters and research publications,
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interpreted as specific advice for any specific person or situation. In our
research, we utilize information sources that we believe are reliable, but
do not warrant the accuracy of those sources or our analysis. Research, data
and opinions expressed on this site are for information purposes only, are
general in character and are not advice specific to any individual investor.
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Equity Income Alternatives To Bonds
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