I have recently received many calls from clients who are concerned about their investment options for the conservative part of their portfolio.
Corporate and municipal bond yields have dropped to levels where there are doubts on whether their real returns will keep up with inflation and taxes.
Many investors feel that with the poor financial condition of many states, counties, and cities there is a legitimate risk of default on their paper.
They have expressed that the risk to their principal is not justified by the meager yields and returns they are seeing.
In addition, the recent market surge has led many clients to worry about the market being overvalued.
They believe that the benefit of purchasing a blue chip stock with a 4 to 7 percent dividend is outweighed by the market risk of a 10 to 20 percent correction.
Investors have witnessed the market continue to rise despite macro events like unrest in the Mideast, a dangerous Japan quake/tsunami, our own government's budget crisis, and quantitative easing concerns.
What options do investors have in this situation? Quality secured income funds and the use of covered call writing are two possible strategies.
Many investors cringe at the words "secured income fund" given the recent turmoil in the real estate market.
The key is for investors to "do their homework" and find the right secured income fund for them.
Every day, there are many articles and newscasts detailing the amount of people of who have lost their home and how some neighborhoods have turned into the equivalent of 21st century "Ghost Towns".
Most of these people go from being homeowners to renters, which is an indication of a tactical shift in the U.
S.
real estate market.
Bloomberg recently reported on April 5, 2011 that apartment vacancies had fallen to a 3 year low.
If you look carefully you can find some commercial real estate secured income funds that are focused solely on apartment communities.
The best of these funds will offer monthly or quarterly payments to investors in the range of 6 to 10 percent annually, will be fully audited by a reputable accounting firm, and have management with a proven track record giving an advantageous absolute return.
Writing covered calls against your stock positions may also prove to be a successful strategy in the current market environment.
This is one of the few options strategies that can actually reduce the risk of owning an individual stock while generating some cash flow in your portfolio.
If the stock also pays a dividend, you will continue to collect that dividend in addition to the premium of selling the call until or if that stock is "called away" from you.
Overall, writing covered calls against your stock positions after the recent upward move by the market may be a good way for you to generate some extra income and protect some of your profits.
It is important to keep your money working hard for you.
Staying on the sidelines while sitting in money markets or certificates of deposit may very likely provide an inadequate return for you to meet your retirement goals.
Spending a little time to ensure that your portfolio is focused towards your objectives may be one of the best investments you ever make.