Finding income continues to be the name of the game for many investors as interest rates continue to remain at paltry levels. Traditional sources such as money markets, CD's and treasury bonds barely provide any distributions and aren't currently beating inflation. In order to find reliable sources of income, retail investors can get an idea of how to position themselves from reading what Wall Street pros have to say. Managing $3.4 trillion in assets including its Nasdaq Composite Index Tracking ETF (Nasdaq:ONEQ), Fidelity certainly qualifies as a pro. With the bulk of these assets located in retirement accounts and workplace savings plans, the firm has spent much time tailoring its research towards those nearing or in retirement. Fidelity's latest missive gives retail investors plenty of opportunities to "reboot" their income streams.

SEE: Save Smart With A CD Ladder

Investopedia Broker Guides: Enhance your trading with the tools from today's top online brokers.

Simple, but Powerful Income Options
Given the Federal Reserve's pledge to keep interest rates effectively at zero until 2014 and the sheer number of baby boomers entering their golden years, it's no wonder why so many investors have income on the brain. However, those low rates have sent investors to all ends of the market place in order find higher yields. Fidelity predicts a less than 10% risk of another recession happening in the United States over the next few months. The group believes that certain select risk assets will outperform riskless assets such as Treasuries over the year. However, the surging returns seen for many of these assets over the last few years won't be repeated. Nonetheless, many of these assets still will provide quality income streams for investors.

Focus on Growing Dividends
Fidelity's first income idea shouldn't come as that much of a shock to investors. High quality dividend stocks remain at the top of the asset managers list. Conversely, it's not just any stock with a high yield. Only companies with strong, time-tested businesses that can increase dividend payments over time should be considered by investors. By choosing firms with strong economic moats and a history of rising dividends, investors are able to stay the hand of inflation on their income streams. Rival Vanguard offers the Vanguard Dividend Appreciation ETF (ARCA:VIG). The fund tracks a basket of 135 different firms that have a record of increasing dividends over time. This includes holdings in IBM (NYSE:IBM) and United Technologies (NYSE:UTX). While the exchange-traded funds (ETFs) yield isn't that high (2.12%), the fund offers the potential for high dividend growth.

SEE: Build A Dividend Portfolio That Grows With You

Look Towards Asia
The asset manager also thinks investors should look towards the west for higher income. Current dividend yields in Asia are higher than those in the U.S., and have grown at a much faster rate. While the continent has often been seen as a growth element, dividends have been a major contributor to total returns and help identify well-managed companies in Asia. The iShares Asia/Pacific Dividend 30 (ARCA:DVYA) allows investors to bet on a basket of 30 different high yielding stocks across developed Asia. Australia takes the top spot at 45% of assets, with Hong Kong, Singapore, New Zealand and Japan rounding out the exposure. The fund currently yields 4.82%. Likewise, Fidelity sees opportunity in Asian debt. The easiest way to gain access is still the WisdomTree Asia Local Debt ETF (ARCA:ALD).

Take More Credit Risk
In order to gain more income from bond investments, portfolios can either take on more interest rate risk (buy longer maturing bonds) or credit risk. Fidelity believes the best solution is to buy the latter. There's no guarantee that the Fed will actually wait until 2014 to begin tightening rates. It may come sooner than investors think. To that end, Fidelity says keep maturities short. Both the PIMCO 0-5 Year High Yield Corp Bond ETF (ARCA:HYS) and Guggenheim Bullet Shares 2013 HY Corp Bond (ARCA:BSJD) allow investors to bet on short-term junk bonds.

The Bottom Line
For investors, suitable income remains elusive with interest rates at low levels. However, it doesn't need to be hard in order to find great sources of yield. Asset manager Fidelity breaks down some of the best places to gain income exposure today. The previous Fidelity picks along with real estate played via the iShares Cohen & Steers Realty Majors (ARCA:ICF) and convertible bonds played via SPDR Barclays Capital Convertible ETF (ARCA:CWB), make great choices.

Use the Investopedia Stock Simulator to trade the stocks mentioned in this stock analysis, risk free!

At the time of writing, Aaron Levitt did not own shares in any of the companies mentioned in this article.
Related Articles
  1. Mutual Funds & ETFs

    ETF Analysis: iShares US Basic Materials

    Learn about the iShares US Basic Materials exchange-traded fund, which invests in the equities of chemicals, metals and industrial gas companies.
  2. Mutual Funds & ETFs

    ETF Analysis: Ultra Oil & Gas

    Find out more about the ProShares Ultra Oil & Gas exchange-traded fund, the characteristics of the ETF and the suitability and recommendations for the fund.
  3. Mutual Funds & ETFs

    ETF Analysis: PowerShares DB Commodity Tracking

    Find out about the PowerShares DB Commodity Tracking ETF, and explore a detailed analysis of the fund that tracks 14 distinct commodities using futures contracts.
  4. Mutual Funds & ETFs

    ETF Analysis: PowerShares FTSE RAFI US 1000

    Find out about the PowerShares FTSE RAFI U.S. 1000 ETF, and explore detailed analysis of the fund that invests in undervalued stocks.
  5. Mutual Funds & ETFs

    Comparing ETFs Vs. Mutual Funds For Tax Efficiency

    Explore a comparison of mutual funds and exchange-traded funds, or ETFs, and learn what makes ETFs a significantly more tax-efficient investment.
  6. Mutual Funds & ETFs

    ETF Analysis: Vanguard Small-Cap Value

    Find out about the Vanguard Small-Cap Value ETF, and explore detailed analysis of its characteristics, suitability, recommendations and historical statistics.
  7. Mutual Funds & ETFs

    ETF Analysis: Vanguard Intermediate-Term Corp Bd

    Learn about the Vanguard Intermediate-Term Corporate Bond ETF, and explore detailed analysis of the fund's characteristics, risks and historical statistics.
  8. Insurance

    Whole or Term Life Insurance: Which Is Better?

    Learn the difference between term life insurance and whole life insurance. Understand when it is beneficial to buy each type of life insurance.
  9. Mutual Funds & ETFs

    ETF Analysis: iShares 10-20 Year Treasury Bond

    Learn about the iShares 1-20 Year Treasury Bond ETF and its holdings, and understand why investors may be better served to look at other bond funds.
  10. Mutual Funds & ETFs

    ETF Analysis: iShares Global Telecom

    Learn about the iShares Global Telecom exchange-traded fund, which invests in U.S. and foreign telecommunication companies with high dividend yields.
RELATED TERMS
  1. Equity

    The value of an asset less the value of all liabilities on that ...
  2. Exchange-Traded Fund (ETF)

    A security that tracks an index, a commodity or a basket of assets ...
  3. Exchange-Traded Mutual Funds (ETMF)

    Investopedia explains the definition of exchange-traded mutual ...
  4. Hard-To-Sell Asset

    An asset that is extremely difficult to dispose of either due ...
  5. Sucker Yield

    When an investor has essentially risked all of his capital for ...
  6. Lion economies

    A nickname given to Africa's growing economies.
RELATED FAQS
  1. How do dividends affect retained earnings?

    When a company issues a cash dividend to its shareholders, the retained earnings listed on the balance sheet are reduced ... Read Full Answer >>
  2. What is the difference between called-up share capital and paid-up share capital?

    The difference between called-up share capital and paid-up share capital is investors have already paid in full for paid-up ... Read Full Answer >>
  3. Why would a corporation issue convertible bonds?

    A convertible bond represents a hybrid security that has bond and equity features; this type of bond allows the conversion ... Read Full Answer >>
  4. What does a high turnover ratio signify for an investment fund?

    If an investment fund has a high turnover ratio, it indicates it replaces most or all of its holdings over a one-year period. ... Read Full Answer >>
  5. Does index trading increase market vulnerability?

    The rise of index trading may increase the overall vulnerability of the stock market due to increased correlations between ... Read Full Answer >>
  6. How does additional paid in capital affect retained earnings?

    Both additional paid-in capital and retained earnings are entries under the shareholders' equity section of a company's balance ... Read Full Answer >>

You May Also Like

COMPANIES IN THIS ARTICLE
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!