More From Jane Leung, CFA
Where Should You Invest Given This Low Yield Environment?
While high yield bonds could be an avenue for higher yields, they seem risky given the slowing global economy and low oil prices. In such a scenario, preferred stocks could offer some value.
Why Preferred Stocks Are Less Volatile than Common Equities
Preferred stocks are less volatile compared to common equities. This is mainly because a larger portion of the returns comes from dividends, which tend to be stable.
Is Now the Time for Preferred Stocks?
Financials tend to do well when interest rates rise. Rates usually rise when the economy is improving.
When Are Preferred Shares Appropriate for Your Portfolio?
Treasuries (TLO) add ballast to a stock-centric portfolio while providing low yields.
Do Preferred Stocks Underperform When Rates Rise?
Unlike common equities (RSP)(IWB), a rising interest rate scenario doesn’t necessarily affect preferred stocks negatively.