Dan Celia

Financial Issues

December 2015 – Q: We are retired, but hoping to earn income from our investments. How much risk should we take?

A: I don’t believe great risk is required to earn a return on your investments. I suggest that you look into individual municipal bonds. These are not bond funds and not mutual funds, rather they are individual municipal bonds, and they can earn a reasonable return. Ask your financial planning representative.

However, you should know that you are not going to get 6% or 7% without serious risk. If you are wondering how to judge risk, consider the return. When CD rates for an 18-month CD are just over 1% and you are tempted to invest at 6% interest on a particular investment, assume that the risk is great. In general, the higher rate of return, the higher the risk. I advise you to stay away.

Be satisfied with 3½ to 4% in utility stocks or individual bond funds – and buy them for the income, not for their growth in value. Preferred stocks are also a great alternative.

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Dan Celia has been in financial management for more than 30 years. He works closely with AFA Foundation and can be heard six days a week on AFR Talk (afr.net).

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