From The New York Times:

EVERYBODY'S BUSINESS
May Your Portfolio Have a Pleasant Afterlife
By BEN STEIN

Published: January 2, 2005

A WHILE ago, I felt desperately sick. Not ill. Sick. But really bad. I thought I was dying. Naturally, I made my peace with my maker as best I could, looked longingly at my dogs and wife and then prepared for eternity. As I writhed and moaned, a sudden thought hit me that had hit me before: How will my lovely wife and strong teenage son know how to invest my estate so as to have enough money to live on?

That is, they live at a very high level now. But my estate is not so large that they can just put the money into C.D.'s paying 2.5 percent and live at anything like the level they are accustomed to. (My wife was a lawyer for many years but stopped practicing some time ago and has absolutely no desire to go back into the labor force. "I'd rather be dead" is the way she put it when the subject last came up.)

So how would they invest the money so they could live decently until they joined me in eternity?

Luckily, my sickness was just a really bad stomach flu that passed within a day, an agonizing day. But the question lingered in my febrile brain: What is a good income portfolio for a woman of 57 and her teenage son who like living high off the hog?

Of course, they could go with a portfolio of junk bonds. Although some people have good experiences with junk bonds, I have had very bad ones. Or they could go with fixed annuities, but those pay a fairly small interest rate these days, and when my wife passed into immortality, the principal would be gone, thus keeping my son from opening the Auto Speed Shop he's interested in.

So, what I want is a portfolio that pays a good dividend, has a chance of keeping up with inflation and may have some money left over when both Mr. and Mrs. Stein are gone.

Naturally, I consulted Philip DeMuth, my investment adviser pal who is founder and principal of Conservative Wealth Management (and sometime co-author with me of books on political economy and finance). We put our heads together over a lavish lunch at Morton's in Beverly Hills, and this is what we came up with:

To get the highest possible current income, 25 percent of the portfolio would go into the Cohen & Steers Quality Income Realty fund, a leveraged real estate investment trust fund of funds that currently yields 8.32 percent. It achieves that extraordinary rate by investing in a large number of high-yielding real estate investment trusts and by borrowing money to invest still more.

The fund has also had a spectacular capital gain in the last two years - climbing by more than 50 percent - but its vulnerability to changes in interest rates makes it unusually volatile. If interest rates shot up, the spread between the borrowed funds and the yield on a REIT's payouts would eventually shrink and could even become negative, at which point the fund's share price and possibly its yield would fall. That happened in April, when REIT's - and leveraged REIT's in particular - took a major swan dive on fears of higher interest rates, though they recovered quickly.

The fund's managers say they have hedged against interest rate changes for at least four years, but four years is not a long time, and the fund, while a super payer, is not for the faint of heart. Still, its yield is so high that it bears some weight in my proposed portfolio.

I would put another 25 percent in the Alpine Dynamic Dividend fund. This is a stock fund that owns high-dividend stocks, so it pays high dividends. But its managers add another fillip: they buy stocks of companies that have notified the markets of special large dividends, then hold them more than 60 days for tax purposes.

This fund currently yields 7.65 percent. It has the possibility of appreciation (I hope) as its underlying stocks go up. Investing in this type of fund may become a major trend as the streams of baby boomers reaching retirement demand higher-dividend stocks. The market may well shift from one that emphasizes capital gains to one that promises income, especially current income. And if it does, these funds - and a great many roughly similar to them - will benefit.

Inflation is a nasty beast. It is currently tamed. But the past teaches us that it doesn't stay in its cave for long. If it bursts forth, stocks and bonds could take a wicked spill.

The Treasury thoughtfully offers TIPS, for Treasury inflation-protected securities. These are United States Treasury bonds that add to the holder's principal a percentage of the par amount equal to the increase in that year's Consumer Price Index.

These have been a gold mine in recent years. Lately, their yield has lagged behind that of some other funds, but for the widow with a realistic fear of inflation, they are a must for another quarter of the portfolio.

They can also be bought in mutual funds offered by giants like Fidelity and Vanguard. Currently, they yield about 4.5 percent, and that could fall if inflation slows. But if inflation roars, your widow or widower - and orphans, too - will be glad that you thought to recommend TIPS. Beware: you pay tax on the increase in the bonds' principal even if you don't get it right away.

Finally, our pals at Templeton (actually, I have never met them) offer the Templeton Emerging Markets Income fund. It invests in the bonds of countries like Russia, Brazil and South Korea.

In terms of price fluctuations, these bonds - and the fund's price - are like Mr. Toad's Wild Ride. But the fund's yield is fairly stable, and is now hovering at about 7.3 percent. This is also a play on the declining dollar, because many of the bonds pay in local currencies.

Some countries represented in the Templeton fund export minerals, though not all. If the natural resources sector continues to be strong and the dollar continues to fall, the fund should not only be secure but also a source of growth in price and possibly in yield.

THE combined yield of these investments approaches 7 percent. That means they should throw off enough cash so that the beneficiaries can invest some, maybe in exchange-traded funds like Diamonds, which track the Dow Jones industrial average, or Spiders, which track the Standard & Poor's 500-stock index. Or the combined yield may allow enough income for the Ladies Who Lunch or the Men Who Golf to enjoy their days and nights.

I don't claim for a minute that this is a conservative portfolio, despite its provenance. For people who can live more frugally, there are other, far more conservative and maybe more sensible choices. For people who are subject to tax at very high rates ... oh, wait, there aren't any more of those under President Bush.

Still, for those who want lots of income and and are willing to take some risks, this is a high-income portfolio that might make sense for now. What about me? My stomach is feeling better, so I may revise this plan later.

But if someone reads about my demise, he might bring up this plan with my widow. She doesn't bother to read about sordid money matters, so she won't know about it unless someone tells her.