Income-Biased Portfolios
Adviser generally recommends to:
- Seek either bond issues or certificates of deposit that are explicitly backed by the U.S. government or high quality national or state-specific municipal bond issues (AAA rating preferred)
- Avoid new purchases of bond issues maturing beyond a short time frame because of the chance that market-driven rates may significantly rise due to the impact of inflation, a strained U.S. sovereign credit strength or reduced foreign demand for U.S. Treasury debt obligations
- Avoid bond mutual funds since they have no actual maturity date whereby a face value could be expected to be returned on a set future date
- Avoid bond issues that carry a high rating only because of purchased insurance
- Avoid temptation of high-yielding stocks that could reasonably be expected to experience a dividend cut
- Avoid high-yielding preferred stocks which are often very long duration securities and highly sensitive to rising interest rates
- Avoid use of "Stable Value" funds as a high-yielding surrogate for cash if such funds contain onerous liquidity terms and/or contingencies for the value protection of underlying insurance
