Many readers say they are frustrated with the low rates associated with safe investments.

That is understandable. Even with low rates of inflation, if one has substantial investments in money-market instruments or certificates of deposit, theyare not staying ahead of inflation.

Money market funds pay almost nothing, as do most bank accounts. The 10-year year treasury note yields about 0.70%.

After taxes and inflation, one would be receiving a negative return.

Fortunately, there are investments that do provide higher returns. They are not risk free, but consider taking the risk is justified for some of the fixed-income alternatives. In the portfolio, one has maintained substantial investments in municipal bond funds, corporate bond funds and preferred stock exchange-traded funds (ETFs) that have provided consistent returns, well above those of the most conservative investment alternatives. Examples follow.

• Municipal bonds: Because of my age, (well past 70 1/2) I am required to make substantial required minimum distributions (RMDs) each year (with the exception of 2019, thanks to the coronavirus relief bill) from my retirement accounts. Naturally, I would like to minimize my federal tax liabilities associated with the investments I make with distributions not required for my recurring living expenses. I have found that investing in a long-term municipal bond fund is an attractive option. I prefer a fund (or ETF) that contains a diversified portfolio, because I don’t want to be dependent on the risk associated with one state or municipality. I have found that the total returns have been very consistent. All the interest paid is exempt from federal income tax.

My primary choice has been Vanguard’s Long-Term Tax-Exempt Fund (VWLUX). (Note, however, that you can find comparable returns from the funds/ETFs of other major investment companies. Interest is paid monthly.) The expense ratio of VWLUX is low 0.09%. The total year-to-date (Y-T-D) return for 2020 is 3.78%. The one-year return was 4.34%; for five years 4.51%; for 10 years 4.60%. The returns have been consistent. There is no guarantee that these returns will always be positive on a short-term basis, but if you are a long-term investor, in my opinion, your investment risk is minimal. So if you are looking for consistent tax-free income for investments outside of your tax-deferred retirement plans, this is an alternative you can consider.

• Corporate bonds: For many years I have been investing in Vanguard’s Intermediate-Term Investment-Grade Fund (VFIDX) in my retirement account. Again, I believe investing in a diversified fund or ETF to limit investment risk. Investing in an investment grade fund also limits investment risk and provides you with consistent income for long-term investment. Interest for this fund is paid monthly. The expense ratio is low, 0.10%. The total Y-T-D return is 8.37%. The one-year return was 9.07%; three years 6.09%; five years 5.21%. As one can see, the returns have been consistent. For conservative investors, investing in diversified investment-grade bond funds is prudent and provides very good, consistent returns.

• Preferred stocks: Also consider investing in iShares Preferred and Income Securities (PFF), a large ETF, in a retirement account. Again, consider the diversification associated with an EFT or fund. Preferred stocks are generally issued by corporations whose credit rating is below investment grade. However, investors are rewarded with higher returns, and issuing corporations must pay preferred shareholders before they are allowed to pay dividends to holders of common stock. PFF, which is the largest ETF investor of preferred stock, currently has a yield of 5.1%. These dividends are paid monthly.

After holding stock for seven years, each dollar invested seven years ago is now worth approximately $2.70. Dividends have been paid each month and have increased consistently.

If one is a long-term investor, interested in consistent high dividends for part of a fixed income portfolio, one can consider an investment in a large, diversified preferred-stock ETF that restricts its investment to low-risk preferred. (One can review past performance of ETFs at Morningstar.)

(Elliot Raphaelson welcomes your questions and comments at

©2020 Elliot Raphaelson Distributed by Tribune Content Agency LLC

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