preferred stocks

If you look at the stocks they actually hold, financials and insurance co.'s are about 50% of the portfolio (including Merrill Lynch, for example). For all the fancy risk modelling and academic verbiage, their returns lag averages.

Preferred stocks generally are more stable, but the same basics apply: look at the company's earnings first.

Quantumonline.com has Moody's and Standard & Poor ratings of preferred securities issued by, for example, Bank of America and Citigroup. I think it's interesting that BAC and C's preferred issues are either still rated at investment grade or just barely graze into junk territory. (The ratings I saw are about a month old and should be double checked with another source.) Wells Fargo's preferreds are rated about the same as BAC, which I find interesting, since my general impression was WFC was in much better shape than BAC.

Of course, Moody's and Standard & Poor's appear to have played a huge role in the market crash, providing ratings when they were not equipped to analyze the underlying securities.

As has been written here many times now, trust has been lost. I would not buy a bank preferred stock unless I could live without the money. Allocating a tiny amount to a fund of such distressed securities may not be a bad idea, though, again assuming one could live without the money.

Utility preferreds are not yielding as much but seem a much lower risk than the bank preferreds. Plus the utility preferreds typically yield more than CDs these days.

I have lost my trust in those rating agencies, to the extent that I personally fully disregard all their ratings, as if these companies did not exist.