Balance a Portfolio with Stock Strategy

Physician's Money Digest, September30 2003, Volume 10, Issue 18

There are several investment vehicles physician-investors can use to help increase the income generated from their investments and protect their portfolios during turbulent markets. Following is a list of some of these investment vehicles:

Note:

• Dividend-paying stocks. Investing in a diversified group of stocks that pay dividends may be a good strategy for investors looking for potential price appreciation and income. You'll be able to use the dividend payments as income or reinvest them into your portfolio. Evaluate the companies before making your selection and verify that the fundamentals are strong and likely to continue paying dividends.

• Mutual funds. You may be able to take systematic withdrawals from your mutual funds. These can serve as an income stream. While mutual funds are a popular investment for many different types of portfolios, you may not have thought of them as a potential income source.

• Laddered bonds. By staggering bonds with different interest payments and maturity dates, you'll be receiving the interest income throughout the year at different times instead of all at once. Plus, the bonds will mature at different times, allowing you to either reinvest the principal received in a new bond or continue the laddering process.

• Fixed annuities. In simple terms, an annuity is an agreement between you and an insurance company. With a fixed annuity, your assets earn a fixed interest rate and can accumulate tax-deferred. Also, the issuing insurance company guarantees the interest and your principal against loss so you won't be as affected by market fluctuations. Fixed annuities also allow you to exchange the money you accumulate in the contract with a fixed-income stream for a specified time or as long as you live.

Warning:

• Life insurance. Purchasing a life insurance policy has many benefits, including an income tax–free payment to your beneficiaries upon your death. In addition, many life insurance contracts offer cash value buildup, which accumulates tax-deferred. Contract owners seeking income can access the cash value, in many cases, without taxation. Since these investment vehicles might not be appropriate for you, work with your financial advisor to develop the best plan for your situation.

Joseph F. Lagowski is vice president, investments, and a financial consultant with AG Edwards in Hillsborough, NJ. He welcomes questions or comments at 800-288- 0901 or www.agedwards.com/fc/joseph.lagowski. This article was provided by AG Edwards & Sons, Inc, member SIPC.