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Broad question: How can I maximize my income and savings?


Savings and investment income has been a casualty of Federal Reserve policies over the last few years to keep interest rates very low to try to stimulate economic growth. Bank deposits and money-market accounts pay close to zero or maybe one percent, if you’re lucky, and 10-year Treasury bonds have yields barely above two percent. The good news is that rates like those are so meager that they do not present a difficult hurdle to clear.
An obvious place to find higher income is elsewhere in the bond market via a mutual fund or exchange-traded fund, which is a similarly diversified portfolio that trades on a stock exchange. Corporate bonds offer higher yields than Treasury bonds with similar maturities, sometimes substantially higher, and often with little added risk, in the opinion of investment advisers. One ETF that focuses on high-quality issues, Pimco Investment Grade Corporate Bond Index, for instance, recently had an annual yield of 3.3 percent. An ETF that holds bonds of less creditworthy borrowers, iShares iBoxx High Yield Corporate Bond, yielded far more than that, 7.3 percent.
Higher income is also available in many stocks. Some utilities and phone companies pay 4 percent, 5 percent or even 6 percent in annual dividends. Their share prices may fluctuate more than bond prices do, but if you are a long-term investor – which you ought to be – then those ups and downs shouldn’t really matter. Stocks, unlike bonds, offer greater prospects of capital growth, too. When a bond matures, you get your money back. When you sell a safe, high-yield stock that you have held for many years, there is a very good chance that it will be worth more than you paid for it and also that the dividend will have been raised regularly, increasing the annual yield.
-Conrad de Aenlle