By Sharon Epperson Correspondent
updated 5/19/2006 12:19:09 PM ET 2006-05-19T16:19:09

The stock market has been on the skids lately, and investors may be looking for ways to balance the recent sharp fall in equities by finding a steady stream of income for their portfolios.

There are a few ways to do this, but you should also consider the risks. You cold take a “barbell” approach, so-named because the shape that appears when charting the strategy on a timeline looks like a barbell. The idea is you loading up on cash in your portfolio to offset any market volatility.

But adding income investments is a better way to go. And here are some ways to do that:

A CD, or a certificate of deposit, is a bank-issued savings certificate where your principal is guaranteed. And one-year CDs are returning 4.7 percent on average. Some have rates at nearly 5.25 percent.

A diversified bond fund is another option. You’ll likely get a higher yield with a bond fund, but the value of your underlying principal will fluctuate.

Financial planner Doug Lockwood at Harbor Lights Financial reckons investors should have a mix.

“Our feeling is one third in international corporate bonds, a third in high-yield corporate bonds and a third in U.S. domestic corporate bonds,” said Lockwood. “What that does is it helps reduce the bond risk.”

Dividend paying stocks and real estate investment trusts, or REITs, which also pay dividends, can boost the income too. But they don’t always provide as steady a ride.

These investments are really paying you from the results of their business said Steve Ward, chief investment officer at Charles Schwab.

“If the business turns down and they pay you less, that’s all they’re obligated to do,” Ward said. “So you’re taking a share of the fortunes and risks of that business.”

Although similar to a stock in that it offers shares to the public, a REIT has one unique feature: It has to distribute most of its profits as dividends, and the average dividend yield right now is a little under 5 percent. The one-year return is nearly 24 percent compared to 15 percent for the benchmark Standard & Poor’s 500-stock index.

And during the stock market’s recent bear run, dividend-paying stocks haven’t fared too poorly.

These stocks are down 2.5 percent on average this month, compared to a little over 5 percent for non-paying stocks. Dividend-paying stocks are up 4 percent year-to-date versus a 3 percent rise for non-payers, and the average divided is nearly 2 percent.

© 2012 CNBC, Inc. All Rights Reserved


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