In this episode of Strategic Investor Radio, host Charley Wright interviews Eric Lutton, Chief Investment Officer of Sound Income Strategies. Eric is a Chartered Financial Analyst, and his job as CIO of Sound Income Strategies is to generate investment income – this is particularly difficult in today’s low-yield environment, as Charley points out. With investment-grade bond yields at rock-bottom lows, Eric looks to alternative assets like REITs, MLPs, BDCs, and preferred stock in pursuit of portfolio income.
“You don’t have to worry about the stock market, but you do have to worry about Mario Draghi and Janet Yellen,” Charley says, in reference to the chairpersons of the European Central Bank and Federal Reserve, and their ability to roil fixed-income markets with their commentary – let alone their actions. “We could use some higher rates,” Eric admits in response. But his firm’s alternative strategies are designed to produce healthy yields even amid low benchmark rates.
“A drop is coming at some point in equities,” Eric predicts. “Nobody knows the exact date, so it’s better to be prepared than sorry.” To this end, he recommends investors approaching retirement allocate sufficient assets to income, “so they can sleep at night,” in Eric’s words. When asked what keeps him awake at night, Eric responds – not surprisingly – “Well, actually I’ve been hoping for higher rates, believe it or not, Charley.” He adds that his clients have done well, but he hopes to be able to put newer clients “in at higher yields.”
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