Financial Investments: Choosing The Proper Investment Option


When is three percent better than six percent? Yeah, we all know the answer, but only until the prices of the securities we already own start to fall. Then, logic and mathematical acumen fade away and we become susceptible to all kinds of special cures for the periodic onset of higher interest rates.

We'll be told to sit in money until rates stop climbing, or to sell the securities we own now, just before they lose even more of their precious Market Value. Other experts will recommend the purchase of shorter-term bonds or perhaps CDs to stem the tide of the perceived erosion in portfolio values.

There are two important issues that your mother never ever told you about Income Investing: (1) Greater interest rates are good for investors, much better than lower rates, and (2) Picking the right securities to take advantage of the interest rate cycle is not particularly difficult.

Higher rates are great for investors, especially when retirement can be a factor in your investment decisions. The more you receive for your reinvestment money, the more likely it is that you will not need a second job to maintain your standard of living.

Selecting the best securities to reap the benefits of the interest rate cycle isn't particularly difficult, but it does demand a change in focus from the statement bottom line along with the use of a few security types that you may not be 100% comfortable with.

I'm going to assume that you simply are familiar with these options, each of which could possibly be considered (from time to time) for a spot in the well diversified Income Portion of your Asset Allocation:

(1) The standard individual Municipal and Corporate Bonds, Treasuries, Government Agency Securities, as well as Preferred Stocks.

(2) The eyebrow raising Unit Trust varietals, Closed End Funds, Royalty Trusts, and REITs.

The market rules that apply to all of these are fairly predictable, but the capability to generate a safer, greater yielding and flexible portfolio varies substantially within the security types.

So do just a little analysis and spread your dollars around the many management companies that are out there. If your counselor tells you that all of this really is risky, tell them to look into corporate debt restructuring just before you restructure your investment plans.

In the meantime, keep doing your own analysis on restructuring finance and investment plans to yield great returns.

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