It follows that there are a number of income producers that are worthy of the current environment. For example, iShares Intermediate Investment Grade Credit Bond (CIU) may look like it is up against tremendous price resistance today. However, over the next 5 months through the end of 2013, I anticipate a total return of nearly 3.0% (1.25% interest combined with 1.75% capital appreciation).
Not enthralled by 3% through the end of the year? If yields do pull back as I anticipate, one might wish to tack on a bit more muni exposure in a taxable account. The iShares National Muni Bond Fund (MUB) is yielding about as much as corporate credit via CIU. That alone tells an investor to expect a bit of relative outperformance by MUB. I anticipate a total return of 6% through the end of the year (1.25% tax-free interest combined with 4.75% capital appreciation).
Another place to look for income is in the real estate investment trust arena. At the moment, most of them are moving in lock step with the direction of the 10-year U.S. Treasury Bond. While a fund like Vanguard REIT (VNQ) may not be able to reclaim its May highs by the end of December, a total return of 7% is certainly within the realm of probability (1.75% dividend combined with 5.25% capital appreciation).
Gary Gordon is president of Pacific Park Financial, Inc.