PBS Wealthtrack Highlights Rebalance's Latest Investment Strategy
Consuelo Mack: This week’s Action Point comes to us courtesy of a WealthTrack guest and noted financial thought leader, Burton Malkiel, author of the classic A Random Walk Down Wall Street. Malkiel recently wrote an op-ed in the Wall Street Journal extolling the virtues of preferred stocks for retirement accounts. Under his leadership, one of the firms he advises, Rebalance, just allocated 25% of its income portfolio to preferred stock. So this week’s Action Point is, consider some preferred stocks for your portfolio.
Preferred stocks are a kind of hybrid security that sits between bonds and common stocks in a company’s capitalization structure. Preferred stock are junior to bonds but senior to common stocks in their claims and assets. They currently yield considerably more than investment grade bonds. And unlike interest, which is taxed at regular personal income tax rates, preferred dividends are usually are taxed at the much lower long-term capital gains rate. Malkiel points out that investment quality preferred stocks with attractive dividend streams are relatively stable and only moderately more volatile than bonds. His advice? Preferred stocks, which are available in mutual funds in ETFs, are worth considering, especially for retirees in these income-starved times.