Motley Fool Money Why Income Investors Should Look Beyond Index Funds
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Nov 2, 2025 Jay Hatfield, CEO and founder of Infrastructure Capital Advisors, dives into the merits of preferred stocks for income investors. With decades of experience, he explains how preferreds offer high yields and lower volatility compared to common stocks and high-yield bonds. Jay also discusses the importance of active management in preferred ETFs, the complexities of DIY investing, and how corporate capital expenditure is crucial for economic growth. He even shares insights on predicting recessions based on housing trends. A must-listen for investment enthusiasts!
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Preferred Stocks Offer Lower Risk And High Yield
- Preferred stocks sit senior to common equity and receive payments first, reducing risk compared with common shares.
- They offer high yields (often 7–9%) with roughly 40% of the market's volatility, giving attractive income with lower risk.
Diversify Preferred Holdings And Use Listed Issues
- Avoid concentrating preferred holdings; diversify across many issues and pair them with fixed income in your portfolio.
- Use listed preferreds to reduce trading friction and commission costs when possible.
Preferreds Behave Like High-Yield Bonds
- Preferreds resemble high-yield bonds: similar yields but lower default rates, which can boost long-term returns.
- They perform well when equities and rates are stable or falling, fitting a late-cycle tightening-to-loosening environment.