Jodi Heath: May 2014

Monday, May 26, 2014

Warning: Mutual Fund Tax Bills Are Rising...

Warning: Mutual Fund Tax Bills Are Rising http://nick-v.me/1noExwO

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Thursday, May 22, 2014

Is Cash-Secured Puts Part of Your Asset Allocation Model? (Part...

Is Cash-Secured Puts Part of Your Asset Allocation Model? (Part 1) http://nick-v.me/1n3v0ej

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Sunday, May 18, 2014

Investors May ‘Prefer’ to Look Elsewhere for Fixed Income Yield...

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Investors May ‘Prefer’ to Look Elsewhere for Fixed Income Yield

asset allocation puzzle With yield so scarce today, investors are branching out into different asset classes in their search for income. Many investors have set upon preferred stock, a hybrid security usually issued by highly leveraged companies, such as financial institutions, telecoms, and utilities. Preferred stock has characteristics of both bonds and stocks. Like stocks, preferreds are traded daily on an exchange. Like bonds, they pay fixed income on a regular basis (usually quarterly), but typically they do not offer as much capital appreciation potential as common stock. In the capital structure, preferred stock is senior to common stock but junior to corporate bonds, and preferred shareholders have no voting rights.

Preferred stock is not without its headwinds. In fact, there are many significant risk factors that investors must consider. Heavy exposure to financials, regulation changes, and rising

Fixed Income Investing Risk interest rates are foremost on this list. Preferreds are sensitive to interest rates, but unlike bonds, they are at risk in both directions. When rates fall (presently an unlikely event), issuers often call shares to reissue at lower, more favorable rates. When rates go up, preferred stock share prices fall. Preferreds also have call options backed in, usually about five years after issuance, but some can be called even before then. Issuers can suspend dividend payments during rough periods, and in the event of bankruptcy, owners will walk away with nothing (for example, investors in preferred shares from Fannie and Freddie lost everything). In conclusion, preferred stocks’ high yields may be alluring to income-seekers, but investors should approach this space with caution.

falling preferred stock yield

Returns and principal invested in stocks are not guaranteed, and stocks have been more volatile than other asset classes.

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Monday, May 12, 2014

@kirtleybaker @haleighwojo #dodgerswin #dodgerstakeover...

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