What's the average investor to do? Yields from super-safe, fixed-income investments like CDs and U.S. Treasuries are practically nil. Municipal bonds, once considered solid sources of income, are suspect now because of the increasing possibility that cities, states and other government entities will default. The stock market has recovered some lost ground but remains shaky, keeping shareholders on edge with day-to-day gyrations. People of all ages wonder where to put their money, but hardest hit are retirees. They count on income from their investments to cover living expenses, and they need to preserve principal.
Some companies pay shareholders quarterly dividends from their earnings. Shares of these companies or bundles of companies in mutual funds or exchange-traded funds are traded on major stock exchanges through investment companies, online brokerages and other venues. Stock mutual funds offer professional selection and management of a group of stocks, spreading the risk should any of the companies struggle financially. Dividends provide a stream of income to spend or reinvest. Dividend-paying companies often are financially strong, and their stocks offer some protection against profit erosion in the face of interest rate hikes, said Todd Feltz of FeltzWealthPlan.
Source: Omaha.com
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They count on income from their investments to cover living expenses, and they need to preserve principal.