Income Investing Today

06/01/2007 12:00 am EST


Richard Lehmann

Publisher, Forbes/Lehmann Income Securities Investor

If you are looking for a comprehensive, easy-to-read income investing bible, this book is for you.

Richard Lehmann, editor of the hugely popular Forbes/Lehmann Income Securities Investor newsletter, takes a subject that many investors erroneously consider boring and too conservative, and demonstrates how income investing is essential for any investor’s portfolio and should be ignored at your peril. In essence, he shows how including income cannot only reduce the risk of your overall portfolio, but can also increase your returns. And that sounds enticing to me.

Mr. Lehmann extols the virtues of income investing, including its well-known diversification effect on a portfolio, but also one that’s often overlooked: The ease of investment selection (compared to picking the ‘right’ stocks), once the income genre is understood.

He also expertly corrects the mistaken notion that income investing means investing in ‘fixed-income’, or only bonds, which often provide paltry returns in a low-rate environment. Instead, his intent in this tome is to provide investors with a selection of income investments that will return an annual 7-8% return—a far cry from traditional income selections.

His first step is to show readers exactly why including income investments in every investor’s portfolio is a no-brainer. He then defines several investment strategies as well as the subjective and objective risks involved in income investing.

After the preliminaries are taken care of, Mr. Lehmann writes as thorough (and not mind-numbing!) an explanation of the relationship between interest rates and income investments as I have read, and even includes incredibly pertinent information on ‘when to sell’ your investments—a topic rarely broached in financial annals.

A discussion of financial statements follows, and then the heart of the book—an explanation of the ‘many-more-than-you-ever-thought-existed’—income investments ensues. Ranging from the basics on the various types of Treasury, municipal, and corporate bonds to a discourse on Step-up and Pay, then onto preferreds, hybrids, and convertibles, Mr. Lehmann includes a variety of income investments designed to attract even the most income-resistant investor.

But wait—he’s not finished yet! Many investors often neglect another income sector—equities with income—that can also beef up their portfolios. Here, Mr. Lehmann directs considerable pages to income stocks such as Canadian Energy and Royalty Trusts and Real Estate Investment Trusts, followed by a discourse on income-producing mutual funds and exchange-traded funds.

A delightful chapter on ‘Securities and Other Investments to Avoid’ is not to be missed, as the author shows just how silly (and money-losing) some of the esoteric, complicated products brought to market can be.

Next, the issue of taxation is thoroughly discussed, along with suggested strategies for minimizing that hit to investment profits, and is then followed by recommended long-term income-investing strategies.

Lastly, readers will find the appendix of great use, as it includes information sources, as well as a well-stocked glossary of terms endemic to the income industry.

In summary, Mr. Lehmann has written a truly enjoyable, comprehensive ‘how-to’ income investing book. He has tackled this often-dry subject in a straightforward, easily read, and understood manner.

And for investors—novice or experienced—this book is well worth your time.

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