No Easy Answers For Bond Investors, Especially For Those in Retirement

Retired fixed income investors will only be able to generate about two-thirds of the income today that they did ten years ago, according to Guy Lebas, chief fixed income strategist at Janney. Lebas says even if investors including riskier bonds and some dividend paying stocks in their portfolios, returns have been diminishing due to persistently low rates. For younger, more aggressive investors in higher risk bonds, long term returns would range between 6 and 12 percent for those with a twenty to thirty year investment horizon. Lebas also said over the next five years, the outlook for inflation is muddled, making it difficult for fixed income investors to hedge their portfolios. He added that means investors need to consider more sophisticated investment strategies, such as using derivatives and options. Lebas spoke with TheStreet's Rhonda Schaffler at Camp Kotok, an annual retreat for money managers and economists in Grand Lake Stream, Maine.