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Planning Income Investments Despite Low Yields

Low interest rates may mean it will take longer to achieve

When Federal Reserve Bank Chairman Ben Bernanke announced earlier this month that he wanted to maintain interest rates close to zero for at least another three years, he got considerable pushback, Bloomberg reported.

Three people on the 10-member Federal Open Market Committee voted no. The disagreement marked the first time in almost 20 years that three voters dissented to a Fed chairman's suggested policy, the news source reports.

Bernanke's proposal may not be very popular among investors either, particularly those hoping to see higher returns from money market funds and savings accounts in the short term, according to Zacks Investment Research. Investors will be facing a compressed yield curve on the long end too, the source says.

Luckily, income investors still have options. Blue chip stocks may not produce big margins in the near future, but when drawn out over a five to 20 year period, the chance of profit is higher than it would be with bond investments, the source says.

Preferred shares - such as the iShares S&P U.S. Preferred Stock Index - can result in a higher dividend yield, and are "hybrid securities that act like bonds in that investors get a fixed payment, but still represent ownership in a business like a stock."