Dear Mr. Berko:

We have plenty of money but little income. We’d like more income, and our broker recommends we invest $50,000 each (a total of $250,000) in five different corporate bond funds yielding 4 percent. This would bring us about $10,000 a year in bond income, which is $7,000 more than we get at the bank. Please tell us what you think about these bond funds. This is almost all of our remaining cash. We also have $250,000 in five American Funds. We have taken a 4 percent annual withdrawal from them since 2007, and as you can see, we’ve lost lots of money. We’re not sure about putting $250,000 in bonds, but our broker says that their analyst recommends corporate bonds because of their safety in a slowing economy. Both of us have Social Security and pensions, $19,000 in credit card and other debts, our home is mortgage-free and we are not hurting, but we’re pinching pennies.

Dear R.C.:

Those bond funds own many quality issues, and I’d be proud as a patriot to own the underlying common stock. But any analysts recommending long-term bonds in this market ought to be charged with sedition. I’m “gabberflasted.” Several readers have referred to Lisa Shalett’s (chief investment officer at Merrill Lynch Global Wealth Management) affinity for corporate bonds, and she may be right for the short term (six to 16 months), but it’s the longer term where we expect to spend the remainder of our investment life. And ramping up on 4 percent corporate bonds is the equivalent of skydiving without a parachute; you’ll be OK for the first few thousand feet. But investing $250,000 (nearly half your assets) in bonds yielding 4 percent is financial malfeasance.

Your mutual funds make me cringe. You own American Funds’ largest mutuals: Growth Fund of America, Fund of America, Investment Company of America, Fundamental Investors and Washington Mutual, each with a 5.75 percent sales charge. And those five funds have had a negative performance during the past five years. Because you’ve been taking 4 percent from principal since 2008, it’s little wonder your account is down significantly.

Your original investment is down by $44,200, and you paid a 5.75 percent sales commission plus annual management fees for this privilege. If your five American Funds are down 3 percent between now and this time next year and you take 4 percent again for income, you’ll lose 7 percent more in principal. This is why I always recommend dividend growth stocks. Though their values should also fall in a declining market, your dividend income will grow most years, and if you own the right issues, you won’t have to invade principal. Issues like AT&T, ConocoPhillips, Novartis, Buckeye Partners, Kinder Morgan, PPL Corp., AstraZeneca and Altria are just a few that yield over 5 percent and have regular dividend increases.

I was fortunate to be trained in the brokerage business 50 years ago by a Jim Barnes, the dean of old-school stockbrokers. Back then, brokers were chosen because they had a high degree of probity, because they were intelligent and because they felt a kinship with the business. The customer always came first, which was old-school, but those times are gone.

Today’s brokers are smart lads, but they’re also articulate incompetents. They lack the skills to recognize long-term growth and income stocks, to pick an undervalued utility issue, to identify a convertible preferred or select municipal bonds that represent good value. Today’s brokers are trained to sell high-commission mutual funds, corporate bond and municipal bond funds, exchange-traded funds, variable annuities, real estate and hedge funds. Today the customer doesn’t come first, which is evident by how poorly your broker was trained and by how poorly you have done.