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For an investor depending on fixed income securities for income, this chart means trouble. If you’re rolling over CDs or renewing treasury securities as they come due, you’re seeing your income take a big dive (which is why every investor needs some balance in their portfolio. Money in the Dow Jones Average has risen 300% in the last 10 years and would have offset the falling yields on fixed income securities). If you want to obtain more income now, here are two alternatives that can increase your cash flow:
Preferred Shares—there are still many preferred shares paying fixed income in the 8% range. These include well known companies such as TCI (the nation’s largest cable company, 25 3/8, yield 8.59%), Placer Dome (North America’s largest gold mining company, 24 7/16, yield 8.82%), Public Storage (America’s largest mini-storage company, 25 3/8, yield 8.73%,), Gables Residential (a large Real Estate Trust renting upscale apartments to yuppies, 24 3/16, yield 8.56%) and Trinet (the nation’s largest triple-net lessor, 22 7/8, yield 8.6%).
Immediate Annuity—A 70-year-old male can receive $871 monthly for life by depositing $100,000. This is an excellent cash flow. While such annuities may not be good for people who want to leave money to heirs (the payments stop at death), there are some immediate annuities that provide an “installment refund” to beneficiaries. You can get additional information by completing the enclosed reply coupon.
Note that investments compared to CDs and T-Bills are not insured while CDs are FDIC insured and the federal government guarantees T-bills. Nothing herein is intended to be legal or tax advice. Readers are encouraged to consult their accountant or attorney. Mention of a particular investment should not be considered a recommendation. Recommendations can only be made by determining your suitability. Past performance is not a guarantee of future results and no investment strategy can guarantee positive returns. Any rates quoted herein are subject to change. The S&P 500 and Dow Jones Industrial Averages are weighted, unmanaged indexes. Mutual fund performance figures are from Morningstar Principia as of 9/30/98 . Stock market measurements are taken from Ibbotson and Associates 1997 Yearbook. Performance measurements of the Dow 5, 10, Fair Value portfolio and mutual funds are as of 9/30/98 (unless otherwise stated) and include reinvested dividends and are before deductions for management fees or transaction costs.