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