Cash and bonds provide stability, whereas stocks offer the potential for inflation-beating gains over the long term. One trick is to make your stock portfolio pull double duty and give you an income stream today, by building it around stocks that pay dividends — income payouts that corporations make to shareholders.
Let’s say a company’s stock sells for $25 a share and pays an annual dividend of $1. That means for every share you buy at $25 you will get an annual income payout equal to 4 percent. If you already own a broad stock market index in your 401(k), you are getting some dividend income; the yield on the S&P 500 is about 2 percent these days.
You can get more dividend income by focusing on a portfolio that specializes in dividend payers.
All of this should offer some pretty good ammunition for savers who are ready to fight back.
Carla Fried has written for Money and The New York Times.
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