Tag Archives: MLPs

The Yield Paradox

I have been struggling to understand a problem that I am going to refer to as the ‘yield paradox.’  Yields for individual asset classes look low.  The 10-year Treasury bond is yielding about 1.9%, and 30-year Treasury bonds are yielding a similarly paltry 3%.  The S&P 500 is yielding 2.1%, which is very low by comparison to historical levels.  Investment-grade corporate bond indexes are yielding less than 4% (see LQD, for example, at 3.8%).  Given that the official rate of inflation for 2012 was 1.7%, these yields mean that investors are getting very little yield net of inflation.  The very low yields on bonds and on stock indexes is a direct result of the Fed’s actions in holding interest rates at historical lows via Quantitative Easing.  We have not yet gotten to the paradox. Continue reading

What Are the Core Asset Classes for Income Portfolios?

In a recent post, I presented a list of the ‘core asset classes’ that investors need in order to build portfolios that fully exploit available diversification opportunities.  That article focused on portfolios designed for total return potential, the combined return from price appreciation and income generated by the assets in the portfolio.  For investors focusing on building income-generating portfolios, the core asset classes are somewhat different.  In this article, I present a proposed set of core asset classes for income-focused investors, along with examples of representative funds.  Continue reading

Saving and Investing for Retirement: Part Four

Generating Income: Part Four of Our Special Five Part Series

During their working years, investors focus on saving and investing with a goal of building wealth.  As they enter retirement, either by ceasing paid employment entirely or by scaling back paid employment, investors shift their focus to using their portfolios to provide a reliable long-term stream of income.  This transition from building wealth to income generation is the subject of a great deal of research in retirement planning.  Once investors are at or near retirement, the most significant financial challenge is using their accumulated savings to provide substantial income for their retirement years.  Continue reading