Being an income investor in today’s low-yield environment is a challenge, to say the least. U.S. Treasury bonds are paying near-zero, high-credit-quality corporates and municipals are paying well below 3%, and last week saw record outflows on junk bond funds.
So where should the smart income investor go now? It depends on how much income you need and how much market risk you are willing to take.
Some investors simply want as much yield as they can get without going overboard on principal risk; others need to accomplish the so-called 4% rule for retirement income, which makes certain assumptions about average rates of return and inflation and ensures a high probability that the retirement portfolio account value will not decline to zero in the investor’s lifetime, up to 30 years from the start of retirement.
Or you might be simply looking for the best of both worlds — an equity-income strategy that can take advantage of late-bull market gains while providing dividends to take some of the sting out of a bear market decline.
No matter what your investment strategy, we did some digging and found 3 dividend mutual funds paying higher than 3% now.