I discovered this very informative article, “No-Stock Portfolio,” via Tip’d this weekend and it really gave me a stronger sense of the number of non-stock investment options there are out there. So often I get stuck in the mindset that “investing” refers to either the stock market or real estate when the area is so much larger. Jeffrey Kosnett, the author and a senior editor at Kiplinger’s, goes into a sample portfolio you could build of non-stock investments, he calls it his Tofurky Porfolio (meat that isn’t meat!), and I think its value is in the investments he outlines and not in the percentages he selects.
The investments he describes were:
- Blue-chip IOUs: These are high quality corporate bonds from companies that have been beat up lately.
- REIT Preferred: Real estate investment trust preferred stock. It’s stock but they are senior to common stock and you get dividends first. One of the companies he mentioned, COPT, owns pretty much every building I’ve ever worked in for the last 5 years (well, except my house).
- Energy: Specifically funds that track oil and natural gas commodities. Oil is down pretty big right now with the fears of a world-wide recession, but you know the black stuff can’t be held down for long.
- Tax-free income: These are tax-exempt bonds like state and local municipal bonds (muni’s). For a little while I was in Vanguard’s tax exempt money market but the yield on that baby pretty much dried up.
- Gold: Another commodity, gold is always a favorite because it’s a hedge against inflation (which we will probably see quite a bit of once the recession subsides, you don’t print money without having some sort of risk). If the idea of gold, or other such commodities, interests you, one of the better books on the subject, including detailed how-to’s, is Peter Schiff’s Bull Moves in Bear Markets.
I’ve been interested in getting more involved with higher yield bonds, either corporate or muni’s, as their yields often beat the best certificate of deposit and high yield savings accounts rates. There’s risk involved, CD’s and savings accounts are FDIC insured and bonds can default, but I would imagine muni’s are pretty safe.
I can’t, for the life of me, figure out how I can buy individual municipal bond. When I do a search, I’m inundated with mutual fund companies with Maryland municipal bond funds, but no way to buy an individual bond. Is this a sign that I should be buying individual muni’s or am I just looking in the wrong place? If Vanguard had a Maryland muni fund I’d be all over it but they don’t and the thought of opening yet another account is unappealing.
This post is originally from Blueprint for Financial Prosperity.
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