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Abstract: 

The investment scene has been changing over the past 20 years in a dramatic manner, with interest rates all over the board from highs to lows. Recently interest rates have reached new lows (thus reducing the amount payable to an income beneficiary of a trust) while the fair market prices of stocks have generally been rising in 2003. Thus, one can feel the pressure that both income beneficiaries and fiduciaries have been under to maintain an income stream to the current income beneficiary under a trust, while not undermining the entire portfolio trying to get higher yielding bonds (or changing asset allocation percentages). Modern portfolio theory (Prudent Investor Rule) mandates one to invest using a “total return” concept [i.e., combining the yield on the investment plus the appreciation (or depreciation) of the values of the underlying securities].

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Affiliations:  1: The PrivateBank and Trust Company.