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Strategies & Market Trends : Dividend investing for retirement -- Ignore unavailable to you. Want to Upgrade?

To: stock bull who wrote (4317)	4/3/2010 10:13:53 PM
From: Investor2	Read Replies (1) \| Respond to of 34328

RE: "... has anyone given thought on how to protect their interest rate sensitive investments? ... My thoughts have ranged from 'doing nothing' to selling all my bond holdings and start moving into CD's and living off the cash generated by the sale of the funds." I'm also trying to come up with a fixed income solution or alternative. I had been moving my T-Bill money into CDs, but now CD rates are SO low. I have loads of GNMAs, but I hate to rely on GNMAs in a rising interest rate cycle. I just purchased my first TIP (10-year bond), with the hope that the inflation protection will minimize the impact of rising interest rates. While the answer may be investing in dividend paying stocks with a history of dividend increases, I hate to invest my "fixed income money" in the stock market after a huge rise in the market. I look forward to seeing responses to your post. Best wishes, I2

To: stock bull who wrote (4317)	4/3/2010 10:17:41 PM
From: Steve Felix	Read Replies (1) \| Respond to of 34328

Hi Stock Bull and welcome to the thread. Curious if you are old enough to be collecting SS? Personally, I am not and don't know about others. There are some younger people here, much smarter than I was at there age. :( There are differing ideas here on bonds/CDs, bonds/dividend stocks, and SS + pensions serving as the bond portion of a portfolio. Of course each has to go with their own comfort level. I'm sure others will jump in, but here are some past thoughts: Message 26419719 Message 26341211 Message 26419969 Message 26419772

To: stock bull who wrote (4317)	4/3/2010 11:27:17 PM
From: Kip S	Read Replies (2) \| Respond to of 34328

Stock Bull, A couple points/suggestions. First off, although I agree that while the Fed will likely start tightening in the second half of the year (or so), long-term bond rates are not directly related to Fed actions and have been rising of late. For example, the ten-year Treasury (benchmark) rate was less than 2% 15 months ago. Currently it is nearly 3.9%, so those investors have a sizable loss. The relatively benign jobs report on Friday drove yields up, with longer term Treasuries taking a loss of more than 1 point (1%).So you should take action sooner and not wait for the Fed to raise its target rate. The traditional approach is to retreat to a money market fund, but with yields at about zero, they are not very appealing. You can find an insured money market account that is yielding as much as 1.3%--not much, but no loss and access to your money anytime. Another choice is to move into a short term bond fund--one with a duration in the range of around 2 years or even less (That would translate into an average maturity of around 2-2&1/2 years. There you can probably get a yield of about 2.5%, but you are subject to some capital loss. Here, a 1% increase in rates would cause about a 2% capital loss. That is a lot better than the 10-15% loss you would experience in a long-term bond fund, though. You have to evaluate the tradeoff for yourself. Is getting another point or two in current yield worth the risk of some capital loss? Hope this help a bit.