How to grow your nest egg with an acceptable level of risk

WASHINGTON — Looking to get a nice return on your investment dollars at a level of risk you’re comfortable with?

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Janet Bodnar with Kiplinger Personal Finance said many investors like municipal bonds because they are generally low risk and the federal government doesn’t tax the interest.

That could make the bonds worth more.

“You might get, for example, a tax-free municipal bond that yields a 3 percent. That would be the coupon yield. But because you have this additional tax break, that could jack the return up, depending on what your tax bracket is,” she said. “Highly rated municipal bonds, I think, are the thing that you want to look for.”

Another option worth investigating is dividend stocks that will get you a return of about 4 to 6 percent.

“Traditional dividend-paying stocks are companies like electric, gas and water utilities or telecommunications companies,” Bodnar said.

She added that her company, Kiplinger, likes AT&T and Verizon right now.

“What you’re looking for are companies that pay consistent dividends and that have actually perhaps raised their dividends on a consistent basis over time.”

If you can handle more risk, Bodnar said taking a look at master limited partnerships that can earn returns as big as 11 percent.

“Generally, they are partnerships that have to do with energy infrastructure: Oil pipelines, natural gas processing facilities and storage depots.”

“These types of things have to pass on most of their cash flow through to investors, so they’re very popular with income-seekers. But they do fluctuate in value depending on what’s happening with stocks, especially what’s happening with energy stocks.”

She did caution that you should look into these options very thoroughly before making any big decisions.

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