Remember the good old days, when you could put some of your portfolio into a high-yield income fund and make 10% on your money? Sure you knew there were some junk bonds, but bond funds rarely had any significant problems.
That world came to an end when mortgage-backed securities went into default by the garbage truck load. So you bailed out of those funds with some loss in time to watch your stock mutual funds lose 40%.
Where should you put your money now, in a junk bond fund? The sad truth about bond funds is that if interest rates go up, the value of the fund goes down. It's just the math and how it works. You have to depend, over time, that the interest rates will be reasonably level of slightly falling to profit as expected from a bond fund.
Federal funds are already at an all-time low; they can't fall any further. And with over a trillion dollars in newly printed money, inflation will be coming back, and with it, higher interest rates. A bond fund over the next few years is almost a guaranteed loss.
Is there such a thing as a safe high-yield investing strategy in today's world of bailouts and bankruptcy? Fortunately there is. It's the strategy the pros use when there is little certainty in the direction of the market. It's the strategy the pros use to lock in profits early and take them to the bank.
Fortunately, this strategy is not only a safe high-yield investing strategy, but it is also easy to learn and easy to do. It involves selling call options to significantly boost the safety of your investments and give you monthly income.
There are several ways to do this, but the easiest to learn is the covered call. In this strategy, you buy 100 shares of stock and sell a call option. If you select the right call option, you can sometimes generate 2-4% in income for the month, even if the stock falls 5%.
Well-placed put options are also a great tool for protecting your account. The last thing you need, after diligent safe investing is to have a downturn whack your savings. The "protective put" is also a key strategy that you must learn.
Investing in the coming years will be treacherous. Safe high-yield investing will be difficult to accomplish without a good understand of all the tools.
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