I am in the last 10 years of my professional career. Kids left the nest. No debts. Have some disposable income to invest towards retirement over the next 10 years before I retire.

I am looking to put together a fixed income portfolio that would protect my principal and yield 3-5% return.

Any suggestions ?

  • 1
    Consider how long you will be living off this portfolio. Is it really reasonable to move it all to a fixed-income, interest-bearing allocation just because of your age? If you are in the last decade of your professional career (which I take to mean that you're around 60 years old), and assuming you live in a Western nation, to a first order approximation you can probably expect to live for at least another 20 years. That's still a pretty long investment horizon. By all means, securing some of the capital sounds like a good plan, but do consider if you want to do that to all of it.
    – user
    Jul 23 '16 at 18:47

Thanks for the question. I do not know if you know or not, but interest rates are extremely low currently. Look at a 30 Year Treasury , it is yielding 228 basis points.(2.28%) and that is backed by the United States Government while the SPX or Standard and Poor's 500 Index ( stocks) is returning around 8% currently and no guarantee that it will stay that way by year end.

If I could guarantee 3-5% for life, I would be very well off. - I say that because interest rates around the world are so low currently.

Warning : All investment involves risk, but here is what I suggest you do.

  1. Search for corporations that have the highest credit rating and offer the most yield.

    • This is equivalent to taking the least amount of risk with most reward.
    • The higher the credit rating, the least likely they are too theoretically default.
    • Google to see what the credit ratings mean. (You have to do some homework, otherwise I could do it for you but,would have to charge you a fee. ;) )
  2. Google will bring you here

    According to MarketWatch

  • "In a sign of deteriorating credit quality, Standard & Poor’s on Tuesday stripped oil giant Exxon Mobil Corp. of its pristine AAA rating, leaving just two U.S. non-financial companies with what is the highest possible rating on their debt."
  1. I then searched for those two companies. I got one of them, Microsoft.

  2. Go to this website ( FINRA Bond Center - Market Data - Morningstar is a place to find corporate bond data) Finra: Click on Search Tab

  3. Click the "Corporate bubble for type of debt instrument" Then in issuer name, type in "Microsoft"

  4. Sort by Yield. That is what we want. I found this one

    MICROSOFT CORP MSFT4307011 Yes Corporate Bond 4.750 11/03/2055 Aaa AAA AA+ 114.665 4.002

  5. The yield is deceiving and does not set what it actually trades for. The correct yield is in bold:

    7/22/2016 09:44:36 7/27/2016 T 3000000 115.383 3.969%

  6. That means that if you bought that specific one, it will pay you a coupon of half that yield in bold semi-annually.(every 6 months)

  7. I am going off the assumption you understand 100% on bonds work and understand the risks associated with them including, duration, convexity, and other risks including liquidity risk meaning when you are trying to sell or buy a bond because fixed income is less liquid on average than equities ( for now).

Hope this helps!

**Shortened version, buy US Investment Grade Corporate Bonds**

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