Income seekers need to have an open mind now more than ever, even when it comes to one of the more trendy plays, dividend stocks.
Most investors already know that traditional sources of income like Treasurys and investment grade bonds come with puny yields these days. But investors' recent favorite income source — stocks that throw off high dividends — are starting to look expensive too, according to Goldman Sachs Asset Management.
The solution, said Glen Casey, global head of global product strategy and development for GSAM, is to start looking more broadly for income producers.
“The traditional ways are gone,” he said. “Investors need to take a more thoughtful approach to dividend investing. There's a clear need for products that address current income needs.”
Goldman Sachs recently revamped its balanced fund to make it an income building fund to meet that need. The newly dubbed Goldman Sachs Income Builder Ticker:(GSBFX) is still a balanced fund, in the sense that it's starting point will be a 50/50 split between stocks and bonds. The fund's managers will look to offer substantially higher yields than the S&P 500, however.
“The emphasis is on a consistent level of income,” Mr. Casey said.
The fund will invest in a mix of high dividend stocks, master limited partnerships, high yield bonds, real estate investment trusts, non-U.S. bonds, convertibles and preferred shares.
The diversification between asset classes, should in theory, make the fund less volatile than a straight dividend equity fund or high yield bond fund.