MFS Manager Scours the Globe for Yield

Margaret Dumont: Three months ago you promised to put me into society. In all that time, you've done nothing but draw a very handsome salary!

Groucho Marx: You think that's nothing? How many men do you think draw a handsome salary? You could count them on the fingers of one hand.

-- Marx Brothers, A Night at the Opera

Investors know how Groucho felt. These days even your investments are finding it hard to earn a decent salary. Good yields are scarce.

Cash will get you up to 5.25%, sure, but only for a few months. Thirty-year government bonds are paying just 4.8%, or 2.4% after inflation. High-yield debt is starting to look like medium-yield debt: The extra interest you get for the extra risk is near record lows. And dividend stocks have risen so far that the yield on State Street's S&P Dividend SPDR(SDY Quote) is just 2.33%. That's less than inflation.

No wonder Boston fund company MFS has struck a chord with investors with its (DIFAX Quote)Diversified Income Fund (DIFAX), which aims to offer a decent and sustainable yield by mixing dividend stocks, REITS, government bonds, high-yield debt and emerging market bonds. It's among a wave of new products specifically designed to target retiring baby boomers by offering an income stream that might last 30 years or more.

"The aim is to give ordinary investors a yield of 4% to 5%, which is competitive with cash, but still have a growth engine in there," says MFS strategist Jim Swanson, who manages the fund. "The fund is 40% stocks, mostly income-oriented, and 60% bonds. It's not for 40 year olds, it's for 50 and 60 year olds, people who are getting close to retirement and facing this dilemma," Swanson says.