Why Hold?

	Roger Conrad Utility Forecaster.com
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When interest rates are rising, it's time to play defense. Cash is the only investment guaranteed not to lose ground. And the Income Portfolio carries a hefty amount at 35 percent of total assets.

But no matter how bearish you are, going all cash is a bad idea. As long as your picks continue to pay dividends and (hopefully) grow, the damage from a rate cycle will be relatively ephemeral.

The whole purpose of income investing is to hold on long enough to collect interest and dividends. Trading positions when you're seeking yield only enriches your broker and Uncle Sam.

We're confident is the Portfolio's balance and high quality. Furthermore, some of our holdings have the power to buck the downtrend, including utilities and big oils.

Defense play Northrop Grumman Convertible Preferred B has held flat as Northrop common stock strengthened on the company's growing prosperity. And our bond funds are holding fast, thanks to low duration.

Verizon's fate is linked to its earnings and its successful bid for MCI Communications--not to interest rates.

Of our more vulnerable holdings, Regions Financial is bucking banks' downdraft with solid deposit growth and savings from last year's Union Planters merger. It also offloaded its wholesale mortgage division last month, further reducing rate exposure.

Selling for less than 12 times earnings and 1.4 times book value, Regions is a good way for conservative investors to maintain exposure to the banking sector. Regions is a buy up to 33.

After five years of big gains, real estate investment trusts (REITs) are extremely vulnerable to rising interest rates. Our three picks—Boston Properties, New Plan Excel and Prologis Trust—are top drawer for property quality, management and improving finances. They remain the best way for you to maintain REIT exposure.

But they're also almost sure to give way if interest rates continue higher. All three remain on watch until we see lower prices.

The two Portfolio picks taking the greatest hits so far are closed-end Flaherty & Crumrine Preferred Income Fund and property management company WP Carey. Flaherty & Crumrine's has declined because of a swing from a steep 25 percent premium to a discount to net asset value (NAV).

Closed-end funds across the board have followed that pattern. However, Flaherty & Crumrine is managed to maintain a stable NAV around $16 a share. If it succeeds, that will prove a superb buying opportunity.

There's no guarantee of success. But for those who don't own it, Flaherty & Crumrine Preferred is a buy up to 16.

Added in February, WP Carey has since reported solid fourth quarter 2004 earnings. It's also announced a potentially lucrative property purchase (Telcordia Technologies Office Campus) and increased its dividend to 44.4 cents a share, effective with the April 15 payment.

The stock, however, has performed poorly, spiking after our initial recommendation to the mid-30s before falling back to the high 20s. On the positive side, the yield is now more than 6 percent. But given how rate sensitive this stock is, it's going to be volatile—WP Carey remains on watch for now.

Roger Conrad will be available to take your questions until Monday, April 18. Please use the form below to submit your questions.