Angling for HIGH YIELDS in Today's Market

Use our guide to hook the best income opportunities in nine categories, from super-safe options to higher-risk choices with big potential rewards.

- ANDREW TANZER

Late to address the inflation challenge, the Federal Reserve Board has made up for lost time by jacking up the federal funds rate (the rate banks charge each other for overnight loans) by 4.75 percentage points since March 2022. The rate hikes have not yet slain the inflation bogeyman—but did succeed in crushing stock and bond markets in 2022. Now the Fed must also weigh the risks of a banking crisis and possible recession in determining its path forward.

If there is one silver lining from the dramatic tightening of monetary policy, it is that much-higher rates have produced some attractive yields for investors in bonds and some other asset classes. “Investors have opportunities in all kinds of income-producing categories that they haven’t had for 15 years,” says Andy Kapyrin, co-chief investment officer of CI Regent-Atlantic Private Wealth.

Yields are respectable again in Treasury securities and high-grade corporate IOUs and much plumper in riskier high-yield bonds. Weaker stock prices and increases in dividend distributions have created opportunities in stocks and energy-infrastructure businesses, with the additional advantage of providing some protection against rising consumer prices. As a result of jumpy markets, shares of many closed-end funds and business development companies (a new category in this year’s income survey) are selling at significant discounts to the value of the assets in their portfolios.

This guide will help you find attractive income-producing investments in nine different categories, ranging from low-risk, ordinary securities to rather complex, high-risk offerings with the potential for high returns. Although yields and risk typically move higher in lockstep, that’s not always the case this year, and we’ve listed investments roughly in order of ascending risk.