First, the good news: From June 2007 through September 2008 (i.e., during the credit crisis) Income CEF payouts per share were virtually unchanged. From June 2008 through September 2008, payouts rose slightly--- 29 funds raised their payouts and 17 lowered them. Your portfolio spending money should be higher than it was a year ago.

Brokerage firm monthly statements are designed to promote either fear or greed, depending on the current market environment. Nowhere on your statement can you find numbers that report your net investment, your total working capital, or your true asset allocation. Current and projected income numbers are given little attention, and monthly withdrawals are treated like losses of principal.

Income portfolios are reported upon using the same format as growth portfolios, and too much analysis is required to determine if the income production is either safe or adequate based on each investor's personalized plan. Even for portfolios that, by design, are retirement income providers, sleep-inducing comfort information is not provided.

The most disconcerting column on the statement is the "Unrealized Gain/Loss Column", particularly when you manage your portfolio according to the Working Capital Model. All profits of any magnitude are realized ASAP, and you should not expect a lot of your positions to be "in the black". Wall Street statements create a perception that the red numbers are bad, without any analysis of what should be expected based on market conditions.

Wall Street has long ignored the income portion of the portfolio, combining it in overall totals and summaries to confuse and befuddle those who would prefer to have comfort and clarity on a more personalized level. Recently, some pretty boring securities have been speculatively sliced, diced, and re-formatted into MBWMFDs (Mortgage Based Weapons of Mass Financial Destruction), causing most income investors a great deal of discomfort.

The "Investment Grade Value Stock Expectation Analyzer" helps investors understand the market value movements of high quality equity securities. No statement should ever be a surprise--- in either direction. A similar presentation for income CEFs cannot be produced for lack of a recognized content rating system. The statistics in the first paragraph are based on a portfolio of 114 managed income CEFs.

Income investing is naturally less risky than equity investing, except when the credit markets are in turmoil as they are today. Steps are being taken to reduce the problems, but no cure should really be expected overnight. There have always been two types of risk in income investing, and in that sense, nothing has changed.

(1) Credit risk involves the ability of corporations, government entities, and even individuals, to make good on their financial commitments; we minimize this risk by selecting only higher quality (investment grade) securities. Thus far, there have been extremely few actual defaults on high quality debt instruments--- none, I believe, in the Municipal arena.

(2) Market risk, or the change in current market value, is uncontrollable and unavoidable, but the impact of loss can be minimized with proper diversification. There are many varieties of income producers ranging from corporate, municipal, and government debt, through various kinds of preferred securities, REITs and other real estate investments, royalty trusts, etc. Typically, IRE (interest rate expectations) moves these markets more than any other factor.

Understanding that market value changes are normal, and having a plan of action for dealing with such fluctuations, is essential. It is important to understand as well, that providers of non-market influenced savings vehicles like CDs must invest your money elsewhere to pay you the amounts that they promise. You have access to the very same investment vehicles--- and without as much overhead.

Confucius say: Investor with income securities in safe deposit box is always happy--- because he has no idea what the market value is, and the income keeps rolling in.

Monitoring investment performance the Wall Street way is inappropriate and problematic for income investors. It focuses on short-term dislocations and uncontrollable cyclical changes, producing constant disappointment and encouraging inappropriate transactional responses. But safe deposit boxes are inconvenient.

One way to keep your eye on the income ball is to follow "Base Income" statement totals instead of market value totals. Base income includes only the dividends and interest produced by your portfolio and, if you don't focus on it during market corrections, you can be certain that your portfolio income at retirement will be inadequate. A cost-based asset allocation formula is needed to grow your retirement income.

The income portion of the portfolio will grow better where the focus is on "working capital" instead of market value. This year, for example, I have seen fearful investors move from CEF portfolios of insured municipals yielding over 5% into 2% taxable CDs and Money Market funds--- only because the fund market value has fallen in reaction to the credit crunch.

The market value myopia normally makes income securities more attractive at higher prices and lower yields, just as investors generally feel much safer throwing their money at the stock market when it is achieving new ATHs (All Time Highs). They do it all the time--- this Wall Street conventional wisdom keeps most investors hypnotized forever.

A Working Capital Model approach to your income portfolio will keep you focused on the income and will make that whole retirement investing thing significantly less scary. As far as the stock market is concerned, this has now become the biggest investment opportunity in at least the last twenty-five years.

Wall Street, as preoccupied as most of it is with survival, hasn't had a chance to tell you, and the media--- well here's that catastrophic hurricane they've been hoping for. Why aren't you buying!