This is not a good time for investors seeking income to reach for higher yields. Rising interest rates and the possibility the Fed might trigger a recession increase the risk of many high-yielding investments, explains Bob Carlson, editor of Retirement Watch.
In our Retirement Paycheck portfolio, we seek above-average yields while maintaining a margin of safety and the potential for capital gains. Achieving those goals requires that we venture outside traditional retirement income investments and avoid a buy-and-hold strategy.
The portfolio owns high-yielding emerging market stocks through Cambria Emerging Shareholder Yield (EYLD). The ETF recently had a yield of 7.06%.
The fund’s sponsor, Cambria, uses several measures to rank stocks by their ability to continue to pay and increase dividends. EYLD buys the top 100 emerging market stocks in the ranking.
EYLD had a volatile year and has been hurt by a combination of the invasion of Ukraine and economic problems in China. The fund is down 17.39% so far in 2022 and 20.83% over 12 months.
The portfolio also owns Cambria Trinity (TRTY). The managers of this fund change how it is allocated among U.S. stocks, foreign stocks, bonds, real assets, cash and other investments using models that assess value, momentum and market trends.
Most of the investments in the fund are ETFs that represent the different asset classes recommended by the models. TRTY has very low costs.
The yield recently was 5.93%. It is among the top-ranked tactical asset allocation funds by Morningstar for each measurement period over the last three years.
