With The Fed Rate So Low, Where Do You Go For Income?

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The Fed (FOMC) just announced that they would NOT raise interest rates (the Fed Funds rate to be exact). This low interest rate policy continues to punish savers and investors.

While I would love to give you my opinion of the Fed policy, I will spare you and keep my mouth shut. In fact, the question shouldn’t be “is the Fed doing the right thing?”, it should be, “that’s the situation we are dealt, what do we do about it?”

In fact, we’re not alone in asking that question. Many people have bene inquiring with us about our firm’s ability to create retirement income. Our discussions over the past month coincide what we’re seeing with Google as well.

Over the last week as we have seen global bond prices fall to historic lows, and negative in many countries, people are searching the terms “dividend income” and “interest rate income” more and more.

The Quest for Income is Increasing

A chart of the last few decade’s Federal Funds Rate highlights just how desperate the income situation is from a historical perspective.

The Fed Fund Rate Over Time

With this view on income in mind, here’s a few strategies that we put in place for our clients. These are not recommendations for you as your situation may be different and should be adjusted to your needs:

  1. Options trading including: covered calls, short puts, iron condors. (We are one of the few firms that can actually produce yield ourselves with our knowledge in options while maintaining very little risk).
  2. A focus on growth that can be used to compensate any income you may not receive. Who cares if a stock isn’t paying you a dividend if it grows 20-30% in value? We would argue that you can use some of that growth you experience to compensate for the lack of income.
  3. Good dividend paying stocks trading at a value, an area where we have some deep expertise.

So if you’re one of the many investors frustrated at the lack of income available, I’d encourage you to request a IGGA Portfolio Assessment via the form at the bottom of this link. I believe you’ll find the moves we are making to create income for our clients eye opening and you’ll see we do it while keeping their risk profile relatively low.

Here’s to wise investing,
Brett Pattison

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Categories: Strategy.