Getting Income From a Portfolio Is Easier These Days but Risks Remain. Model Portfolios May Be the Answer.

Executive summary:

  • Historically low-interest rates in recent years made it difficult for investors who seek yield from their investment portfolios
  • Rising rates in today's fixed-income markets have led to more attractive bond prices and higher yields, alleviating some of the challenges facing income investors
  • However, higher rates haven't eliminated all our income challenges as higher inflation has reared its ugly head. Advisors seeking to generate income and maintain spending power for clients may benefit from a professionally managed, diversified income model to meet those objectives.

Managing portfolio income has been challenging over the past decade or so as bond yields were historically low. This environment led some investors to seek income by tilting toward riskier assets as they reached for yield. However, bond yields are now beginning to normalize back to levels that offer higher yields and more attractive valuations than we've seen in years. This should allow investors to think along the lines of traditional, more core bond-oriented income portfolios, or does it?