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How To Boost Your Bond Portfolio Without Taking On Too Much Interest Rate Risk (The AllianceBernstein Blog)
Investors expecting interest rates to rise are worried about their bond investments. Guy Davidson writes that there are two things municipal bond investors can do to boost income. “Long-maturity, high-yield bonds as a good opportunity for investors who want to be defensive but are looking to boost their income today,” he writes. These offer more income at the moment and their credit quality is expected to improve. Moreover, he says their 2013 underperformance had little to do with fundamentals.
“For more conservative investors, we think that it makes sense to reduce interest-rate risk by selling long bonds and using the advantages of intermediate-term municipals to enhance returns,” he writes. “A key piece of the puzzle is roll, the natural price gain a bond experiences as it moves closer to maturity. Today’s very low short-term rates mean that the intermediate part of the yield curve is steep, particularly for bonds with five- to eight-year maturities.”
Every Investor Needs To Remember This Retirement Equation (JP Morgan Asset Management)
There are six key things to consider when it comes to your retirement and you will have better control of some (like your saving and spending habits or portfolio risk) than others (market returns). Here’s a look at the retirement equation from JP Morgan Asset Management’s 2014 ‘Guide to Retirement’.
Affluent Investors Are Delaying Retirement (Investment News)
A study by Market Strategies International has found that only 28% of affluent investors “are highly confident that they can generate enough income in retirement to cover all of their expenses,” reports Carl O’Donnell at Investment News. The average respondent said he or she was delaying retirement till 68. The “demise of pensions,” medical costs, and longer lifespans are all weighing on retirement security.
“Prior generations had steady jobs with pensions so there’s a certainty of collecting a paycheck each week,” Michael Solari, principal at Solari Financial Planning, told O’Donnell. “Baby boomers have had to figure out how much to save, how to invest and how to budget expenses. Even if they do it right, there’s no guarantee that they will collect the same paycheck each week.”
After a stellar stock market run, many are worried that they’re buying at the top and that a correction is coming. But Business Insider’s Andy Kiersz writes that investors should consider dollar-cost averaging — in which you invest a fixed amount of money in an asset at fixed times. “Dollar-cost averaging isn’t about losing money as the stock market falls. It’s about buying increasing amounts of shares at cheaper prices, which means bigger returns during the rally.”
“If you are investing for the long haul, and can hang on through watching your portfolio’s value drop temporarily in bad times, starting to invest in stocks, even near a peak, may not be as terrifying as it looks. The market has always bounced back sooner or later, so if you can hold on until that later, don’t panic.”
American companies continue to sit on piles of cash. As economic growth continues to totter along, companies are putting the money towards dividends and share buybacks. “Companies continue to increase their shareholders’ returns through buybacks and cash dividends,” says S&P senior index analyst Howard Silverblatt.
“These two expenditures, combined, reached $US214.4 billion in the fourth quarter — the second highest level (Q3 2007 holds the record at $US233.2 billion) and three times the Q2 2009 Bear market level ($71.8 billion). Helping companies do this are record earnings, record cash-flow and record cash reserves; pushing companies are activist investors and the growing concern within board room over outside holders ‘coming in’.” Some economists do however think a business spending boom is coming soon.
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