If you are like many investors, you most probably have been noticing and keeping up with the recent market fluctuations. During these times, you may be looking for opportunities to help protect your investments and possibly generate some income from your portfolio. The good news is there are several strategies investors can use to help increase the income generated from their investments and help protect your portfolio during turbulent markets. Let’s take a look at some of these strategies:

Dividend paying stocks. Not all stocks are created alike and investors often overlook this strategy of generating income. Investing in a diversified group of stocks that pay dividends may be a good strategy for those looking for potential price appreciation and income stream. You will be able to use the dividend payments as income or reinvest them into your portfolio as you see fit. With this strategy, it is important to evaluate the companies you may be investing in before making your selection and verify that the fundamentals are strong and that they are likely to continue paying dividends to investors.

Mutual funds. Another strategy for generating income while maintaining proper portfolio diversification is mutual funds. You may be able to take systematic withdrawals from your mutual funds. These can serve as an “income stream”, while enabling you to enjoy the benefits of diversification. While mutual funds are a popular investment for many different types of portfolios, you may not have thought of them as a potential income source.
Laddered bonds. Staggering bonds with different interest payment and maturity dates has been popular for many income investors. By laddering the interest payment dates, you’ll be receiving the interest income throughout the year at different times instead of all at once. And by staggering the maturity dates, the bonds will mature at different times, allowing you to either reinvest the principal received in a new bond or continue the laddering process if desired.

Fixed annuities. In simple terms, an annuity is an agreement between you and an insurance company. With a fixed annuity, your assets earn a fixed interest rate and can accumulate tax-deferred. Also, the issuing insurance company guarantees* the interest and your principal against loss so you won’t be as affected by market fluctuations. Fixed annuities also allow you to exchange the money you accumulate in the contract for a fixed income stream for a specified time or as long as you live.

Life insurance. Purchasing a life insurance policy has many benefits including an income tax free payment to your beneficiaries upon your death. In addition, many life insurance contracts offer cash value buildup. This cash value accumulates tax-deferred. Contract owners seeking income can access the cash value, in many cases, without taxation.

Keep in mind, not all of the above strategies are appropriate for every investor so it is vital that you work closely with your financial consultant in order to develop the best plan for your financial situation. Be aware that the value of some investments will fluctuate and may be worth more or less than the original investment when redeemed. Also, as your situation changes or new developments occur, you’ll want to revisit your portfolio to ensure the changes are reflected in your allocation of investments.

*Guarantee is based on the claims paying ability of the issuing life insurance company.

This article provided by Susan Saleem at A.G. Edwards & Sons, Inc. Member SIPC. Call Susan at (281) 340-8844 with any questions.