Wednesday, December 30, 2009

Don’t Forget Investment Income!

With both stock and bond prices rising, investors are in a good mood. Indeed, many of us have recovered most of our losses from last year's crash. Although increasing values is part of that recovery, investment income (dividends and interest income) is an important factor in that recovery.

Let's say you have $100,000 invested in a balanced portfolio of stock and bond funds. If that portfolio throws off 3% of its value in dividend and income, it is generating an average of $250 per month for you. In bear markets, it protects you from losses. In bull markets, it provides you with a nice kicker.

Our strategy: Income from mutual funds is reinvested in the fund automatically. For stock and ETF dividends, we are reinvesting the income in a Fidelity Target date fund.

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