Investment Decisions: Picking The Suitable Option

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When is three percent better than 6 percent? Yeah, we all know the answer, but only until the prices of the securities we presently own begin to fall. Then, logic and mathematical acumen go away and we become susceptible to all kinds of special cures for the occasional onset of higher interest rates.

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

There are actually two crucial things that your mother never ever told you about Income Investing: (1) Higher interest rates are excellent for investors, even better than lower rates, and (2) Picking the right securities to take advantage of the interest rate cycle just isn't particularly difficult.

Higher rates are good for investors, especially when retirement is a factor in your investment decisions. The more you get for your reinvestment dollars, the more likely it is that you will not need a second job to maintain your way of life.

Choosing the right securities to reap the benefits of the interest rate cycle is not particularly difficult, however it does require a change in focus from the statement bottom line along with the use of a few security types that you might not be 100% comfortable with.

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

(1) The traditional 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 Real Estate Investment Trusts.

The market rules that apply to most of these are fairly predictable, but the ability to produce a safer, higher yielding and flexible portfolio varies drastically within the security types.

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

In the meantime, keep doing your own personal research on restructuring finance and investment plans to yield exceptional returns.

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