Alternatives to Yields on Stocks

Like you, I am a DIY portfolio manager—and I’m retired, so I like to make a lot of money but am wary of losing much, or any. 

A portfolio holding a mix of stocks and bonds is a popular hedge against serious losses—say, 60% or 70% or 80% common stocks with 20% or 30% or 40% bonds, all chosen carefully and cautiously.

Another possibility is to acquire preferred rather than common stocks. Preferred stocks may carry less risk than common stocks because the preferred are something like a merger of bonds and common stocks. However, there’s a problem lurking:

As with bonds, the resale value of preferred stocks falls when interest rates rise. In the May 18, 2013 issue of The Wall Street Journal, Tom Lauricella examines the current search for higher yields in stocks, bonds, preferred stocks, master limited partnerships, and REITs—with a warning about non-U.S. real-estate investment trusts. Also:

At TDAmeritrade, you’ll find a preferred-stocks screener that identifies 15 with yields greater than 7%. That’s not a recommendation of what to invest in. It’s an informative list published on May 18, 2013.

Never forget: All investments and savings are gambles on the unknown future and thus subject to loss.