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Guarding Your Wealth for Seniors
How Retirees Boost Income from Their Investments
By Jeffrey D. Voudrie, CFP
March 26, 2006 - Retirees have two major investment
goals. They want income to provide for their living expenses today, and
they need growth so they can maintain their standard of living in the
future. This week I’ll focus on effective ways to manage your portfolio
that may dramatically increase your income. Next week I’ll share
growth-oriented strategies.
My clients expect me to find opportunities to
increase their income and grow their money. That’s why I’ve developed
specific strategies using high-yielding securities--strategies my
clients can’t get elsewhere. Understanding the investments used may help
you develop your own strategy.
High-Dividend Paying and Preferred Stocks: The days
of being able to buy a dominant company like AT&T, hold it for life and
live off the dividends are over. A great company today can be a has-been
tomorrow. If managed correctly, though, a basket of high-dividend paying
stocks can be a great addition to a senior’s portfolio.
There are many quality companies that pay dividends
of 6-9% per year. These are often the companies ignored by Wall Street
and other advisors because they have little growth potential. Instead,
they have stable cash flows and pay healthy dividends.
For instance, Citizens Communications (CZN) is a
rural telephone company. Rural doesn’t mean small. They operate in 24
states and are one of the nations’ largest independent
telecommunications providers. Boring. Yet it pays out a dividend of over
9%! I’m not saying you should rush out and buy Citizens, but this is
just one of many such over-looked companies.
Canadian Income Trusts (CITs) are another example
of securities that can provide an income stream of 5-8% per year. CITs
are foreign securities that trade on the Pink Sheets in the U.S. Don’t
think that they are risky companies because they trade on the Pink
Sheets. They aren’t. In fact, many are some of the largest and most
stable businesses in Canada.
For instance, Yellow Pages Income Fund provides
online and offline telephone directories across much of Canada. Its
business is stable and doesn’t grow by leaps and bounds, yet it pays a
dependable dividend over 5% in U.S. dollars. Moreover, it has steadily
increased it.
Closed-End Funds (CEF): These are similar to the
open-end mutual funds we are all familiar with. The difference is that
they act more like a stock. Money is initially raised in a public
offering. The money manager then oversees that pool of money. The size
of the pool isn’t determined by investors putting money in or taking it
out. Just like a stock, investors buying and selling shares in the CEF
determine its share price, not the underlying value of its investments.
This presents opportunity. First, the manager has
the ability to buy investments for the long-term. Unlike the open-end
fund manager, the CEF manager doesn’t have to sell investments to fund
shareholder withdrawals. Secondly, assets can be purchased for a
discount to their market value.
Morgan Stanley Global Opportunity Bond Fund (MGB)
is an example of a closed-end fund that has done well. Its current yield
is over 8%. Typically, I only recommend buying CEFs trading at a
discount, but this one may be worth its premium.
High-yielding investments have up and down cycles
so you have to be disciplined and patient. These cycles don’t affect the
dividend, but you should only buy when the investment is at or below an
established target price.
The problem with these investments is that they
require work. They are not investments the average investor should own
unless that investor is willing to commit several hours a week to
research and monitor each one. You will also have to make adjustments
from time to time.
On the other hand, isn’t that what people should
expect from their advisor? Aren’t you paying them to manage your money?
Yet few advisors use these gems. Most advisors don’t even understand
these investments nor do they have effective strategies that leverage
their benefits. Instead, they focus on selling you, then moving on to
the next person.
You deserve better. If you aren’t able to invest
the time and energy into managing investments like these you should find
a professional that will. There’s no reason you should have to settle
for low-yielding investments.
If you have a specific question or would like more
information give me a call toll-free at 1-877-827-1463 or go to
www.guardingyourwealth.com. You can also reach me by email at
jeff@guardingyourwealth.com.
About Guarding Your Wealth:
“Guarding Your Wealth” is a
nationally syndicated weekly personal finance column written by Jeffrey
D. Voudrie, CFP. Mr. Voudrie is the President of Legacy Planning Group,
a private wealth management firm that employs sophisticated proprietary
strategies designed to protect and grow its clients' investments. Please
visit his website,
www.guardingyourwealth.com to read past articles under the Guarding
Your Wealth Article Archive.
Guarding Your Wealth for Seniors are
a collection of columns by Voudrie that deal with issues of particular
interest to senior citizens. Click here
for all columns.
In addition to being a nationally
syndicated columnist and Certified Financial Planning Practitioner, Mr.
Voudrie provides personal, private money management services to clients
nationwide.
Looking for an energetic expert who
is passionate about financial and wealth management? Mr. Voudrie is an
excellent speaker who will excite and inspire your audience. Mr. Voudrie
is available for a limited number of speaking engagements, television
appearances and radio talk shows. For booking information, email e-mail
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