Tags: Blanchett | income | investments | retirement

Morningstar's Blanchett: Income Investments for Retirement

By    |   Thursday, 16 April 2015 06:20 AM

Some of us might prefer an investment portfolio designed to maximize income in our retirement years, rather than one focused on total return.

And David Blanchett, head of retirement research for Morningstar Investment Management, offers several ideas for what assets might go into such a portfolio.

First, long-term government bonds. While they can be very risky, as they fall hard when interest rates rise, "they provide consistent income year over year," whether rates rise or fall, Blanchett explains on Morningstar.com.

"So, other asset classes like emerging-markets debt and preferred stock are examples of asset classes that really look more attractive from an income lens versus the total-return lens."

Be aware, though, that an income-oriented portfolio is "going to be a little bit less diversified," Blanchett says.

"You're really looking at what types of asset classes create income and which combination of those asset classes makes it the most consistent over time. So things like preferred stocks you probably rarely ever see in a total-return portfolio, but they are a lot more efficient in that income-return focus."

Meanwhile, investment icons from Vanguard Group founder John Bogle to Berkshire Hathaway CEO Warren Buffett constantly extol the virtues of index mutual funds and exchange-traded funds.

So it's no wonder that retirement expert Tom Sightings sees them as a helpful tool for retirement investing. "Investing is so complicated," he notes in U.S. News & World Report.

"How do I make the time? No time? No expertise? No problem. Invest in stock and bond index funds. They usually do better than managed funds. Many financial institutions offer both mutual funds and exchange-traded funds that index stocks and bonds."

You won't get fabulously rich from these funds, but you will enjoy the same returns as the overall market, with less risk than if you buy individual stocks and bonds.

And there's an added bonus. "If you own an index fund, chances are you are diversified," Sightings explains.

To be sure, if you have a 401(k) plan, he warns against investing too heavily in your own company's stock. That's because you don't want to be excessively dependent on your company.

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Some of us might prefer an investment portfolio designed to maximize income in our retirement years, rather than one focused on total return.
Blanchett, income, investments, retirement
Thursday, 16 April 2015 06:20 AM
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