Take Safety In Bonds

Here's how diversifying your portfolio with fixed-income investments can cushion the effects of market volatility

stock price ranges will remain low until corporate earnings improve and layoffs slow down. He believes the real story for investors lays in preferred allocations, which have higher yields that can compensate for lower money market rates (some below 2%). An average blue chip preferred is yielding 6%-7%. With some work you can find 8%-9% yields.

Bryant believes the Federal Reserve may lower interest rates one more time, bringing them close to zero. From there, rates will only go up which will limit bond price appreciation and make yields less attractive. “I would look to a good corporate bond fund as the economy rebounds,” says Bryant. “The bond selection [in a portfolio] should be split 50/50, treasury bonds and corporate bonds.”

Age: 35 and younger

Designed for: investors new to the market, younger with longer time horizon. Primary objective is wealth accumulation.

ASSET
CLASS

RANGE

BRYANT’S
RECOMMENDATION

Stocks

60%-80%

65%

Bonds

10-20

10

REITS

5-15

10

Preferreds

0-10

10

Cash

0-10

5

Here we use nonstock investments as a cushion. Bonds shouldn’t be viewed as a disadvantage to a portfolio because bonds beat stocks for the second year in a row. REITS also had a good two-year run. New money should go into stocks.

Age: 36 to 50

Designed for: investors who have been in the market forsome time, middle-aged. Primary objective is growt with some caution.

ASSET
CLASS

RANGE

BRYANT’S
RECOMMENDATION

Stocks

50%-70%

55%

Bonds

10-25

15

REITS

10-20

10

Preferreds

5-15

15

Cash

10-20

5

Here we still look for growth, but increased exposure to bonds and preferreds allows seasoned investors to sleep at night and avoid portfolio disasters.

Age: 50 and Above

Designed for: older investors preparing for retirement — assumes investor has saved at least 70% of retirement objective.

ASSET
CLASS

RANGE

BRYANT’S
RECOMMENDATION

Stocks

30%-60%

40%

Bonds

20-30

25

REITS

10-25

15

Preferreds

10-25

20

Cash

10-30

5

Here stocks play a less important role than securitieswith a yield; allows investors to view their portfolioas a source of living expenses.

Source: Dale Bryant, portfolio manager for The Bryant Group, www.bryantgroup.com

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