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Investing Guidelines for Seniors

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July 26, 2013 – Comments (3)

Board: Value Hounds

Author: PosFCF

I have the responsibility for helping some seniors make good investment decisions regarding the deployment of their investable assets.

Many have come to me (and increasingly so in the last few years) complaining bitterly that the banks only are paying them a few dollars on their money and that those few dollars were not enough to meet the income needs that aren't met by their pensions and Social Security. They ask me what they should do?

I first explain to them that IMO this is exactly the position and decision that Mr. Bernanke wants them to have to be in and decide upon and why he has initiated the Zero Interest Rate environment and defends it so vigorously, that he wants people to invest in the markets. etc., etc.

Then I'm left with the original question: What to do with the money.

Several years ago, I put a lot of them into nicely paying (a percent or more above T-Bill rates) utility companies and pipeline companies.

Now, I think the equation may be shifting and the signpost for it the rapid movement (rising) in the 10 year T-Bill ($TNX is the symbol for the 10 year yield) on StockCharts.com.

If, indeed, we are entering a period of long-term increases in rates, then one of the things that concerns me is that heavily indebted companies are going to find increasing pressure on their profit margins from higher debt service costs. Utility companies and pipelines companies both usually carry very high debt loads....ergo, perhaps something different needs to be done.

So, I'm casting my screening net across the sea of potential candidates and trying to find large cap (because I think they will fare better if/when any economic turmoil arrives; low debt (for the above stated reason); decently dividend paying enterprises.

My problem so far is that many of the ones that meet the above standards are already getting pretty pricey & I don't want to put them into something that will take back in price history what it provides in dividends.

Three ideas I have so far are: COP, CVX, and USMO (this last one doesn't really meet the definition of large cap but I've had good investment experience with it over the years, but they always call most of their distributions a return of capital).

Any ideas?

Poz 

3 Comments – Post Your Own

#1) On July 26, 2013 at 8:17 PM, awallejr (85.43) wrote:

Well this is why I don't think bonds are about to burst.  Boomers retiring.  It is hard to put them in stocks except very low beta ones like your utilities. You might want to look at annuities, or muni and corporate bonds in solid companies.

BDCs are interesting too since I think they will actually benefit from Dodd-Frank by the larger banks' activities being curtailed.

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#2) On July 27, 2013 at 9:50 AM, 33811billy (< 20) wrote:

7/26/13 Have invested in bullion currencies since 2003. Might it be the right time to sell? 33811billy

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#3) On July 27, 2013 at 4:35 PM, snapperreef (63.93) wrote:

I try to get around the low interest paying banks and certificates by investing in preferred stocks and CEFs(closed end funds) which trade like stocks.

Preferred stocks issued by companies meeting your criteria (I think) would be : the blank space in the symbol is to hold the preferred stock designator like yahoo's is -P and Scottrade's is _p.

Schwab's SCHW B rated Baa2 by Moody 5.96%

Gabelli GAB H rated AAA S&P   5.21%

JPMorgan Chase JPM I BBB S&P  8.44%

First Republic Bank FRC C  Baa3 Moody

These are all investment grade.  By sticking to investment grade stuff you can avoid most of the volatility of the parent equities.  Richard Lehmann/Forbes publishes a good fixed income letter www.isinewsletter.com.

SCOTTRADE, Fidelity and other sites have lists of preferred stocks.  You can go to www.quantumonline.com to find all info about the dividends, 15% tax or not, how divs are paid,monthly, qtrly, etc.QOL is the best site out there for preferred stock info. 

Preferreds are like bonds in that when they mature or are called you get the par value, usually $25.00 so if rates look like they are going up and you're old like me you might not want to get a maturity more than 5 or 10 yrs out.

Best

Charlie 

 

 

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