For many years, your portfolio focused on growth, but as you near retirement that focus typically changes to income generation and capital preservation. A retirement income strategy helps secure a reliable ‘paycheck’ you can count on, plan for, and build your best retirement around. Alpine Hill Advisors’ expertise in fixed income investing offers a knowledgeable perspective as retirement income specialists and solution providers. We believe building individual bond portfolios may be one of the most efficient ways for providing a reliable income stream in retirement; while preserving the capital you accumulated throughout your life.
Although many advisors say they specialize in retirement planning, not every advisor has the toolset or experience to purchase individual bonds. Most advisors might put their clients in bond funds or ETFs, that truly do not possess the same benefits as buying individual bonds. The benefits of individual bonds are that they provide a predictable income stream, while protecting capital. As long as the issuer of the bond does not default, the buyer of the bond can know exactly how much money they will receive throughout the hold period of the individual bond.
Typically, when the stock market booms, many investors may look to dividend-paying stocks instead of bonds to provide income. This isn’t a bad strategy, but bonds have a number of advantages over dividend stocks. Dividend stocks can still expose investors to higher potential risk. A company can cut stock dividends or cancel them altogether, meaning there’s no guarantee of your income over time. A bond interest payment is a contractual obligation by the issuer to make interest payments. You can begin to build a portfolio of individual bonds to project out exactly when you receive your interest payment.
In addition, relying on dividends from stock holdings means exposing yourself to more of the stock market’s volatility. Retirees may still look to stocks out of habit in order to protect against inflation and provide growth opportunities, but it’s worth questioning whether this is the most prudent place to go for income. Keep in mind that bonds typically do not share the same upside gains that the stock market sees, but a consistent stream of income should be paramount for retirees. In addition, in times of market stress bonds provide a haven relative to equities.
We believe this is a great time to consider adding bonds to your portfolio1.
Consider this:
- Bonds are currently offering higher yields than in the past, allowing investors to increase the yield on their portfolios
- Bonds are less volatile than stocks and tend to rise when stocks fall
- Equity markets have a had a fantastic run in the past few years and it may be time to take some of those gains and rotate into bonds especially if you are an individual in or near retirement
- Real yields, which account for inflation, are attractive and provide income that exceeds inflation
The bottom line is that fixed income investments can have several purposes for those nearing retirement or already retired. They can help you preserve your wealth, generate a steady stream of income, diversify your portfolio and manage interest rate risk by building a customized bond ladder with staggered maturities. As retirement income specialists, we understand fully how a proper fixed income strategy can put you on a path to reaching your retirement lifestyle goals.
If you have questions or would like to discuss whether a fixed income strategy may be right for your retirement income goals, we can show you how.
Thanks for reading
Brandon
Brandon Pacilio is President of Alpine Hill Advisors, a Westport, CT Registered Investment Advisor firm. If you would like to contact the author to discuss individual fixed income investing, please e-mail him at bpacilio@alpinehilladvisors.com or call (203) 246-5592.
The information provided is for educational and informational purposes only and does not constitute investment advice and it should not be relied on as such. It should not be considered a solicitation to buy or an offer to sell a security. It does not take into account any investor’s particular investment objectives, strategies, tax status or investment horizon. You should consult your attorney or tax advisor.
No investment strategy or risk management technique can guarantee returns or eliminate risk in any market environment. All investments include a risk of loss that clients should be prepared to bear. The principal risks of Alpine Hill strategies are disclosed in the publicly available Form ADV Part 2A. Although fixed income generally present less short-term risk and volatility risk than stocks, fixed income does contain interest rate risks, the risk of issuer default, issuer credit risk, liquidity risk, and inflation risk.
Alpine Hill Advisors LLC (“Alpine Hill”) is a registered investment advisor. Advisory services are only offered to clients or prospective clients where Alpine Hill and its representatives are properly licensed or exempt from licensure. Please visit our website https://alpinehilladvisors.com for important disclosures.
