The Quest for Income

As the rest of the value world was tweeting and streaming the Omaha carnival this weekend, I specifically ignored it until Sunday. When I finally sat down with some coffee to read the reports, I found some of Buffett's comments to be of great interest. In particular, he said that when the Federal Reserve signals that it will raise rates, it will be the shot heard 'round the world that rocks the financial markets. In a related remark, he said that bonds are horrible investments and contained the possibility for substantial losses. While this is all very true, it has been true for a couple of years and leaves investors in search of income in more of a quandary than ever.

One technique that has worked very well for investors seeking income over the past few years is owning a diversified portfolio of high-yielding alternative investments. A portfolio of high-yield real estate investment trusts, business development companies and mortgage REITs has offered strong cash flow, and most of them have appreciated quite a bit. The iShares FTSE NAREIT Mortgage PLUS Capped Index Fund (REM) has a total return of more than 30% over the past year and has paid out huge dividends. Even after solid appreciation, it still yields more than 11%. We have been able to improve on that a little bit by only buying the high-yielding securities when the entities traded below asset value and owning a diversified portfolio of securities....461 more words left in this article. To read them, just click below and try Real Money FREE for 14 days.

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