The Focus on Income

Download full brochure

Can your portfolio provide the income you need?

Investing for income often raises key concerns for investors. Find answers to help
position your portfolio for income.

  • How do I find income in a low-yield environment?

  • How can I address interest rate uncertainty?

  • How do I manage for income market volatility?

  • What can I do to ease the tax burden?

Question: How do I find income in a low-yield environment?

Attractive income sources have been hard to find. Just a decade ago, investors could generate sufficient income through traditional investments such as those shown below. Today, low yields may not support investors’ ongoing income needs.

Chart 1
Traditional Sources of Income Remain Relatively Low
Yields (December 31, 1995 – December 31, 2015)

Chart does not represent the past performance or yields of any Nuveen fund. For fund performance visit here.

To access important chart disclosures, navigate to bottom of page or view here.

Answer: Think beyond “the usual”.

In the search for income, we believe investors should think beyond traditional options to identify higher-yielding opportunities and build flexible, dynamic portfolios.

Chart 2
Diversify Across a Broad Opportunity Set
Yields as of March 31, 2016

Chart does not represent the past performance or yields of any Nuveen fund. For fund performance visit here.

*Some income may be subject to state and local taxes and the federal alternative minimum tax.

To access important chart disclosures, navigate to bottom of page or view here.

Question: How can I address interest rate uncertainty?

When interest rates rise, the prices of longer duration bonds tend to decline more than shorter duration bonds. With Treasury yields near historic lows, interest rates are likely to rise. The impact on markets and investors will depend on the timing and magnitude of the rate changes.

Chart 3
What Happens to Bond Prices If Interest Rates Rise or Fall by 1%?
Price Decline as of March 31, 2016

A 1% rise in interest rates
Would reduce a $10,000 investment to:

Chart does not represent the past performance or yields of any Nuveen fund. For fund performance visit here.

To access important chart disclosures, navigate to bottom of page or view here.

Answer: Consider asset classes that respond well in different rate environments.

Diversifying a portfolio may provide higher income while potentially reducing interest rate sensitivity and the risk of price declines. One way to balance higher income with shorter duration is with credit investments, which have shown less rate sensitivity since they are valued based on credit quality ratings.

Chart 4
Not All Asset Classes Responded the Same Way to Rising or
Falling Rates

Average Total Return During Rising and Declining Rate Months (June 1, 2007 – March 31, 2016)

Chart does not represent the past performance of any Nuveen fund. For fund performance visit here.

To access important chart disclosures, navigate to bottom of page or view here.

Chart 5
Income-Producing Investments Can Balance Yield and Duration
As of March 31, 2016

Chart does not represent the past performance of any Nuveen fund. For fund performance visit here.

To access important chart disclosures, navigate to bottom of page or view here.

Question: How do I manage for income market volatility?

Increased volatility has resulted from two major concerns: uncertainty over rising rates and perception of risk in the high yield corporate bond market. Fears about market instability or an increase in default rates can often cause credit spreads to widen, creating opportunity for credit-sensitive securities.

Chart 6
A Historical Look at Credit Spreads
Spreads vs. U.S. Treasury Bonds (January 1, 1997 – March 31, 2016)

Chart does not represent the past performance or yields of any Nuveen fund. For fund performance visit here.

To access important chart disclosures, navigate to bottom of page or view here.

Chart 7
Wider Credit Spreads Can Affect the Performance of Asset
Classes Differently

Average Total Return during Months when High Yield Credit Spreads Widened (April 1, 2006 – March 31, 2016)

Chart does not represent the past performance or yields of any Nuveen fund. For fund performance visit here.

To access important chart disclosures, navigate to bottom of page or view here.

Answer: Search for income sources that respond dynamically in changing markets.

Credit investments may offer attractive yields, which compensate investors for taking on added risk from bonds of lower credit quality. Greater levels of income may help boost the total return of a portfolio.

Chart 8
Adding Higher Income Has Helped Increase Total Returns
Average Annualized Total Return Components by Highest to Lowest Income Return (April 1, 2006 – March 31, 2016)

Chart does not represent the past performance or yields of any Nuveen fund. For fund performance visit here.

To access important chart disclosures, navigate to bottom of page or view here.

Question: What can I do to ease the tax burden?

Regardless of your income level, taxes steadily diminish investment results. When federal tax rates increase, achieving after-tax income goals becomes more difficult.

Chart 9
Tax Rates Have Risen for Many Income Investors

Chart 10
Some Tax Bills Dramatically Increased

In this hypothetical example, a married couple in the highest tax bracket has experienced higher taxes over the last few years.

Answer: Manage the income within reach.

It’s not what you earn, it’s what you keep.® Tax-exempt municipal bond investing has stood the test of time. Dividend-paying equities and preferred securities may be taxed at significantly lower levels than ordinary income and may help investors focused on income and returns.

Chart 11
Municipal Bonds Have Provided Attractive Taxable-Equivalent Yields
As of March 31, 2016

Chart does not represent the past performance or yields of any Nuveen fund. For fund performance visit here.

The taxable-equivalent yield is based on a federal tax rate of 28%.

* Some income may be subject to state and local taxes and the federal alternative minimum tax.

To access important chart disclosures, navigate to bottom of page or view here.

Chart 12
Qualified Dividends Have Tax Advantages
American Taxpayer Relief Act of 2012

GET STARTED

  • Financial Advisors:
    Call 800-752-8700

Investors: Contact your financial advisor

Different types of asset investments have different types of risks, which may provide higher returns but also greater volatility. There is no assurance that any asset class or index will provide positive performance over time. Different benchmarks, economic periods, methodologies and market conditions will produce different results. See Endnotes for important disclosures regarding asset class related risks and definitions of each representative asset class. It is not possible to invest directly in an index.

Chart 1 Data source: Barclays and Bloomberg as of 12/31/15. Past performance is no guarantee of future results.

Representative Indexes: 90-Day T-Bill: Barclays U.S. Treasury Bellwethers 3 Month Index; 10-Year Treasury: Barclays U.S. Treasury Bellwethers 10 Yr. Index; 30-Year Treasury: Barclays U.S. Treasury Bellwethers 30 Yr. Index; Investment Grade Municipal Bonds: Barclays Municipal Index; Investment Grade Corporate Bonds: Barclays U.S. Corporate Index.

Chart 2 Data source: Barclays, Bloomberg and BofA Merrill Lynch as of 3/31/16. Past performance is no guarantee of future results. Yields for bonds are yield-to-worst. Yield-to-worst is the lowest potential yield that can be received on a bond without the issuer defaulting. Senior Loans yield is the 3-Year Discount Margin yield. The 3-Year Discount Margin is the yield-to-refunding of a loan facility less the current 3-month LIBOR rate, assuming a 3-year average life for the loan. Dividend-Paying Stocks and REITs are dividend yields. Dividend yield for a company’s stock is the ratio of the dividends paid out by the company each year per share to the share’s current market price. Taxable-equivalent yield is the yield a taxable investment needs to possess (before taxes) for its yield to be equal to that of a tax-free municipal investment. The rate shown is based on a federal rate of 28%.

Representative Indexes: U.S. Treasury Bonds: Barclays U.S. Treasury Index; Investment Grade Municipal Bonds: Barclays Municipal Index; High Yield Municipal Bonds: Barclays High Yield Municipal Bond Index; Senior Loans: Credit Suisse Leveraged Loan Index; Investment Grade Corporate Bonds: Barclays U.S. Corporate Index; High Yield Corporate Bonds: Barclays Corporate High Yield 2% Issuer Capped Index; Preferred Securities: BofA Merrill Lynch Preferred Stock Fixed Rate Index; Real Assets: Real Asset Income Blend; Dividend-Paying Stocks: S&P 500® Dividend Aristocrats Index; Real Estate Investment Trusts (REITs): FTSE NAREIT All Equity REITs Index.

Chart 3 Data source: Barclays Capital as of 3/31/16. Past performance is no guarantee of future results. Yields are yield-to-worst. Yield-to-worst is the lowest potential yield that can be received on a bond without the issuer defaulting. The indices assume reinvestment of all distributions and interest payments. Hypothetical examples are shown for illustrative purposes only.

Representative Indexes: 2-Year Treasury: Barclays U.S. Treasury Bellwethers 2 Yr. Index; 10-Year Treasury: Barclays U.S. Treasury Bellwethers 10 Yr. Index; 30-Year Treasury: Barclays U.S. Treasury Bellwethers 30 Yr. Index.

Chart 4 Data source: Morningstar Direct, 6/1/07–3/31/16, longest time period available for the Real Asset Income Blend. Past performance is no guarantee of future results. Rising rate environment is represented by the months when the 10-Year U.S. Treasury return is less than 0.0%. The average rising rate monthly return for the 10-Year U.S. Treasury during the above stated period was -1.22%. Declining rate environment is represented by the months when the 10-Year U.S. Treasury return is more than 0.0%. The average declining rate monthly return for the 10-Year U.S. Treasury during declining the above stated period was 2.14%. Returns assume the reinvestment of income and no transaction costs or taxes.

Representative Indexes: Dividend-Paying Stocks: S&P 500 Dividend Aristocrats Index; High Yield Corporate Bonds: Barclays Corporate High Yield 2% Issuer Capped Index; High Yield Municipal Bonds: Barclays High Yield Municipal Bond Index; Investment Grade Corporate Bonds: Barclays U.S. Corporate Index; Investment Grade Municipal Bonds: Barclays Municipal Index; Preferred Securities: BofA Merrill Lynch Preferred Stock Fixed Rate Index; Real Assets: Real Asset Income Blend; Real Estate Investment Trusts (REITs): FTSE NAREIT All Equity REITs Index; Senior Loans: Credit Suisse Leveraged Loan Index; U.S. Treasury Bonds: Barclays U.S. Treasury Index.

Chart 5 Data source: Morningstar Direct and Credit Suisse as of 3/31/16. Past performance is no guarantee of future results. Credit Sectors shown are not representative of all available credit sectors. Senior Loans yield is the 3-Year Discount Margin yield. The 3-Year Discount Margin is the yield-to-refunding of a loan facility less the current 3-month LIBOR rate, assuming a 3-year average life for the loan. Short Duration High Yield Municipal Bonds yield is the option adjusted yield. Option adjusted yield is calculated by adding/subtracting the value of a call option/put option to the bond’s market price to obtain the price of an otherwise equivalent but option-free bond. The yield that equates this new higher/lower price to the bond’s cash flows to maturity is the option adjusted yield. Yields for all other bonds are yield-to-worst. Yield-to-worst is the lowest potential yield that can be received on a bond without the issuer defaulting. Duration is a measure of the sensitivity of the price of a fixed-income investment to a change in interest rates. Duration for Senior Loans is based on the maximum reset period for loan interest payments, which is quarterly – or the equivalent of 0.25 years effective duration. As interest rates rise, bond prices fall. Indices are unmanaged and are not available for direct investment.

Representative Indexes: Broad Bond Market: Barclays U.S. Aggregate Bond Index; High Yield Corporate Bonds: Barclays Corporate High Yield 2% Issuer Capped Index; High Yield Municipal Bonds: Barclays High Yield Municipal Bond Index; Investment Grade Corporate Bonds: Barclays U.S. Corporate Index; Investment Grade Municipal Bonds: Barclays Municipal Index; Preferred Securities: BofA Merrill Lynch Preferred Stock Fixed Rate Index; Senior Loans: Credit Suisse Leveraged Loan Index; Short Duration High Yield Municipal Bonds: S&P Short Duration Municipal Yield Index. U.S. Treasury Bonds: Barclays U.S. Treasury Index.

Chart 6 Data sources: Barclays and BofA Merrill Lynch from 1/1/97 - 3/31/16, the longest time period available for the BofA Merrill Lynch Preferred Stock Fixed Rate Index. Credit spreads reflect the yield premium over higher-quality bonds as represented by U.S. Treasury Bonds.

Representative Indexes: High Yield Corporate Bonds: Barclays Corporate High Yield 2% Issuer Capped Index; Preferred Securities: BofA Merrill Lynch Preferred Stock Fixed Rate Index; Investment Grade Corporate Bonds: Barclays U.S. Corporate Index.

Chart 7 Data sources: Barclays, Bloomberg, BofA Merrill Lynch, Credit Suisse from 4/1/06 - 3/31/16. Past performance is no guarantee of future results. Returns are the average across months when the spread for the Barclays Corporate High Yield 2% Issuer Capped Index increased. Returns assume the reinvestment of income and no transaction costs or taxes.

Representative Indexes: Senior Loans: Credit Suisse Leveraged Loan Index; High Yield Corporate Bonds: Barclays Corporate High Yield 2% Issuer Capped Index; Preferred Securities: BofA Merrill Lynch Preferred Stock Fixed Rate Index; Investment Grade Corporate Bonds: Barclays U.S. Corporate Index; Broad Bond Market: Barclays U.S. Aggregate Bond Index; U.S. Treasury Bonds: Barclays U.S. Treasury Index.

Chart 8 Data sources: Barclays, Bloomberg, BofA Merrill Lynch, Credit Suisse from 4/1/06 - 3/31/16. Past performance is no guarantee of future results. Returns assume the reinvestment of income and no transaction costs or taxes.

Representative Indexes: Senior Loans: Credit Suisse Leveraged Loan Index; High Yield Corporate Bonds: Barclays Corporate High Yield 2% Issuer Capped Index; Preferred Securities: BofA Merrill Lynch Preferred Stock Fixed Rate Index; Investment Grade Corporate Bonds: Barclays U.S. Corporate Index; Broad Bond Market: Barclays U.S. Aggregate Bond Index; U.S. Treasury Bonds: Barclays U.S. Treasury Index.

Chart 9 Data source: www.taxpolicycenter.org, Tax Provisions in the American Tax Payer Relief Act of 2012 (ATRA). Investors should consult their professional advisors before making any tax or investment decisions.

Chart 10 Hypothetical example assumes federal taxes for a married couple filing jointly with one salary earner. For this illustration, the alternative minimum tax (AMT) has been ignored. In this simplified example, the hypothetical taxable ordinary income in 2012 and 2013 is $500,000 plus $150,000 in long-term capital-gains and qualified dividends. Taxes and rates for 2012 are calculated as follows: Ordinary income taxed at 35% marginal tax bracket; Long-term capital gains and qualified dividends taxed at 15%. Taxes and rates for “Today” are calculated as follows: Ordinary income taxed at 39.6% marginal tax bracket; Medicare hospital insurance tax of 0.9% on salary income above $250,000; Long-term capital gains and qualified dividends taxed at 20%; Surtax on net investment income of 3.8% on long-term capital gains and qualified dividends due to modified adjusted-gross-income exceeding threshold of $250,000. The Medicare Hospital Insurance Tax and Surtax on Net Investment Income were new in 2013. Investors should consult their professional advisors before making any tax or investment decisions.

Chart 11 Data source: Barclays as of 3/31/16. Past performance is no guarantee of future results. Yields are yield-to-worst. Yield-to-worst is the lowest potential yield that can be received on a bond without the issuer defaulting. Taxable-equivalent yield is the yield a taxable investment needs to possess (before taxes) for its yield to be equal to that of a tax-free municipal investment. They do not take into account the effects of the federal alternative minimum tax (AMT) or capital gains taxes.

Representative Indexes: Short Term Corporate Bonds: Barclays U.S. Government/Credit 1-3 Year Index; Short Term Municipal Bonds: Barclays Municipal Short Index; Intermediate Term Corporate Bonds: Barclays U.S. Government/Credit Intermediate Index; Intermediate Term Municipal Bonds: Barclays Municipal Intermediate Index; High Yield Corporate Bonds: Barclays Corporate High Yield 2% Issuer Capped Index; High Yield Municipal Bonds: Barclays High Yield Municipal Bond Index.

Chart 12 Data source: www.taxpolicycenter.org, Tax Provisions in the American Tax Payer Relief Act of 2012 (ATRA).Investors should consult their professional advisors before making any tax or investment decisions.

Representative Asset Class Definitions

2-YEAR TREASURY: The Barclays U.S. Treasury Bellwethers 2 Yr. Index is an unmanaged index representing the on-the-run (most recently auctioned) U.S. Treasury bond with 2 years’ maturity.

10-YEAR TREASURY: The Barclays U.S. Treasury Bellwethers 10 Yr. Index is an unmanaged index representing the on-the-run (most recently auctioned) U.S. Treasury bond with 10 years’ maturity.

30-YEAR TREASURY: The Barclays U.S. Treasury Bellwethers 30 Yr. Index is an unmanaged index representing the on-the-run (most recently auctioned) U.S. Treasury bond with 30 years’ maturity.

90-DAY T-BILL: The Barclays U.S. Treasury Bellwethers 30 Yr. Index is an unmanaged index representing the on-the-run (most recently auctioned) U.S. Treasury bill with 3 months’ maturity.

BROAD BOND MARKET: The Barclays U.S. Aggregate Bond Index represents securities that are SEC-registered, taxable and dollar denominated. The index covers the U.S. investment grade fixed rate bond market, with index components for government and corporate securities, mortgage passthrough securities and asset-backed securities. These major sectors are subdivided into more specific indices that are calculated and reported on a regular basis.

DIVIDEND-PAYING STOCKS: The S&P 500® Dividend Aristocrats Index measures the performance of large cap, blue chip companies within the S&P 500 that have followed a policy of increasing dividends every year for at least 25 consecutive years.

HIGH YIELD CORPORATE BONDS: The Barclays Corporate High Yield 2% Issuer Capped Index tracks the performance of U.S. non-investment-grade bonds and limits each issuer to 2% of the index.

HIGH YIELD MUNICIPAL BONDS: The Barclays High Yield Municipal Bond Index is an unmanaged index consisting of noninvestment-grade, unrated or below Ba1 bonds.

INTERMEDIATE TERM CORPORATE BONDS: The Barclays U.S. Government/Credit Intermediate Index is an unmanaged index that consists of dollar-denominated, investmentgrade, publicly-issued securities with a maturity between one and ten years that are issued by both corporate issuers and non-corporate issuers.

INTERMEDIATE TERM MUNICIPAL BONDS: The Barclays Municipal Intermediate Index is a subset of the Barclays Capital Municipal Bond Index including maturities of five to ten years.

INVESTMENT GRADE CORPORATE BONDS: The Barclays U.S. Corporate Index is a broad based benchmark that measures the investment grade, fixed-rate, taxable, corporate bond market.

INVESTMENT GRADE MUNICIPAL BONDS: The Barclays Municipal Index covers the USD denominated long-term tax-exempt bond market. The index has four main sectors: state and local general obligation bonds, revenue bonds, insured bonds, and prerefunded bonds.

PREFERRED SECURITIES: The BofA Merrill Lynch Preferred Stock Fixed Rate Index is designed to replicate the total return of a diversified group of investment-grade preferred securities.

REAL ASSETS: The Real Asset Income Blend is a custom Nuveen Investments blend comprised of a weighting of 28% S&P Global Infrastructure Index, 21% FTSE EPRA/NAREIT Developed Index, 18% Wells Fargo Hybrid & Preferred Securities REIT Index, 15% Barclay’s Global Capital Securities Index and 18% Barclays U.S. Corporate HY Index.

REAL ESTATE INVESTMENT TRUSTS (REITs): The FTSE NAREIT All Equity REITs Index is a free float-adjusted market capitalization weighted index that includes all tax qualified REITs listed in the NYSE, AMEX, and NASDAQ National Market.

SENIOR LOANS: The Credit Suisse Leveraged Loan Index is designed to mirror the investable universe of the U.S. dollar-denominated leveraged loan market. Loans are added to the index if they qualify according to the following criteria: The highest Moody’s/S&P ratings are Ba1/BBB+, only funded term loans are included, and the tenor must be at least one year.

SHORT DURATION HIGH YIELD MUNICIPAL BONDS: The S&P Short Duration Municipal Yield Index contains all bonds in the S&P Municipal Bond Index that mature between 1 month and 12 years, and maintains a 10% weighting to AA rated bonds, 10% to A rated bonds, 20% to BBB rated bonds and 60% to BIG/NR bonds.

SHORT TERM CORPORATE BONDS: The Barclays U.S. Government/Credit 1-3 Year Index is an unmanaged index considered representative of performance of short-term U.S. corporate bonds and U.S. government bonds with maturities from one to three years.

SHORT TERM MUNICIPAL BONDS: The Barclays Municipal Short Index is a subset of the Barclays Capital Municipal Bond Index that measures the performance of investment-grade issues with maturities of one to five years.

U.S. TREASURY BONDS: The Barclays U.S. Treasury Index includes public obligations of the U.S. Treasury. Treasury bills are excluded by the maturity constraint but are part of a separate Short Treasury Index. In addition, certain special issues, such as state and local government series bonds (SLGs), as well as U.S. Treasury TIPS, are excluded. STRIPS are excluded from the index because their inclusion would result in double counting.

Endnotes

Asset Class Related Risk

Different types of asset investments have different types of risks, which may provide higher returns but also greater volatility. In general, equity securities tend to be more volatile than fixed income or hybrid securities. The value of, and income generated by, debt securities will decrease or increase based on changes in market interest rates. As interest rates rise, bond prices fall. Government Bonds are guaranteed as to the timely payment of principal and interest. However, there are other factors that can contribute to how securities react in various interest rate environments. Preferred securities combine the features of bonds and stocks, and have credit risk based on the issuer’s ability to make interest and dividend payments when due. The value of a REIT can be hurt by economic downturns or by changes in real estate values, rents, property taxes, interest rates, tax treatment, regulations, or the legal structure of the REIT. Infrastructure-related securities may involve greater exposure to adverse economic, regulatory, political and legal changes. Except in certain circumstances, income is generally subject to both federal and state taxes. Income is only one component of performance and an investor should consider all of the risk factors for each asset class before investing.

A Word on Risk

Mutual fund investing involves risk; principal loss is possible. There is no guarantee that the Funds' investment objectives will be achieved. Risk considerations specific to each Fund are described in the Fund's prospectus which is available on each Fund's Overview page.

This material is not intended to be relied upon as investment advice or recommendations, does not constitute a solicitation to buy or sell securities and should not be considered specific legal, investment or tax advice. The information provided does not take into account the specific objectives, financial situation, or particular needs of any specific person. All investments carry a certain degree of risk and there is no assurance that an investment will provide positive performance over any period of time.

Not registered?

Register for access to investment team commentary, detailed portfolio information, and other advisor resources. For instant access, register now.

Your Contacts

Our goal is to deliver lasting value to our clients. For assistance, please call or email our advisor service team or contact your personal Nuveen Service Team.

Log in to nuveen.com to access your personal Nuveen Service Team.

Financial Advisors

800-752-8700
Email

Registered Investment Advisors

800-558-4487

Account Access

For more information on Mutual Fund Vision, FAN Mail, or accessing client accounts, please visit our advisor account access page.

Advisor Access

Investor Access