Expert: Doug Ingram - 6/6/2003

Question
Hi. I retired early from the Federal govt. I receive a pretty good pension, but I also rely on several streams of business income. I have a substantial amount tied up in Vanguard's NY LT Insured Tax Exempt Bond fund, which spins off over $400 a month in income. My tax bracket is 36%. At this point, I need to maintain my income level, preferably as tax-free as possible.
With the bond market boom now very long in the tooth and equities picking up steam, I'm concerned that my bond fund will go into a downturn with the rest of the bond sector soon. I need to maintain the income stream. One option is to take some profit on the fund, e.g., $20,000, and put it into one or two solid dividend paying stocks with a good yield -- especially given the new favorable tax law.
I'd appreciate your thoughts on this and other options. Thanks.

Answer
I totally agree with you on some points.  My work shows that stocks have one more tumble into September or November.
It should be more sizeable than most people think.

Bonds ARE the safe place to park your money.  You may not make that much, but you preserve what you have!  

If you are weary of bonds, take your profits and go into CDs or money market until stocks get hit one more time.  The time to buy your dividend stocks will be when no ine is interested in stocks.  Right now we are WAY overvalued in stocks - moreso than pre-1929.  

If I'm right, you won't make that much over the next 5 or 6 months, but you'll outearn the rest of the field later!

Good luck.