Is there a bond bubble brewing? In a recent post on The Smarter Investor blog, financial adviser Doug Lockwood examines what fixed-income investors should be concerned about in today's low interest-rate environment. "Quite simply, when interest rates go up, the value of existing bonds goes down because new bonds issued under higher interest rates are naturally more in demand than old bonds paying out under lower interest rates," he writes. To protect yourself from rising rates, Lockwood suggests a range of options, including buying treasury-inflation protected securities, low-duration bonds, and higher yielding, dividend-paying stocks.
Morningstar's director of personal finance, Christine Benz, recently discussed dividend-paying stocks in this article. She cautions investors that while high-quality bonds and many dividend-paying stocks provide investors with a steady income, there are big differences in the level of risk that investors are taking on when they buy stocks. Aside from the risks involved with investing in dividend-paying stocks, Benz says buyers should be aware of the annual fees of dividend-focused stock funds. Also, some funds hold stocks with higher yields than others, and some funds focus on stocks that have longer histories of consistently offering a decent yield. For interested investors, here are 7 highly-ranked dividend funds.
Source: U.S. News and World Report
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