OCEAN CITY – During a recent Outlook 2009 Webcast, a panel of financial experts took questions from Merrill Lynch clients. The following exchange is especially timely for investors who are nearing or in retirement and who need the income from their portfolios.
Q: I’m retired, and my IRA has lost significant value during the past year. I rely on this account for income. Does it make sense to stay in the markets—and are there safe, income-producing investments I can hold in my IRA?
Richard Bernstein, Chief Investment Strategist, Banc of America Securities–Merrill Lynch Research: Investors who are upset by what’s happened to their income stream in the last couple of years are realizing that you have to diversify not only for capital appreciation but for income as well. And there are lots of different ways for investors to try to get a diversified portfolio of streams of income.
Treasuries may not be the only investment strategy. For the first time in 50 years, the yield on the S&P 500 is higher than the yield on the 10-year note. Yes, we can talk about the uncertainty of dividends within the market right now; that’s fine, and it certainly is a risk. But you need to explore a broader range of income alternatives beyond Treasuries. Regardless of whether you’re considering other government-backed bonds, non-U.S. bonds or high-quality stocks that pay dividends, I think quality should be a very key theme.
Michael Hartnett, Chief Global Emerging Markets Equity Strategist, Banc of America Securities–Merrill Lynch Research: Corporate bonds and government-guaranteed bonds are two of the many income streams out there. And I think there are good fixed income opportunities overseas. You can also access foreign fixed income through ETF instruments.
Contact your Financial Advisor to discuss income-stream diversification strategies.
Ask your Financial Advisor about updating your income strategy:
Are there other instruments that provide a higher income stream than my current Treasury holdings?
How do the risks associated with those investments compare with Treasuries?
(A Merrill Lynch Senior Financial Advisor. She can be reached at 410-213-8529.)