BlackRock president: Why I'm in blue-chips

@CNNMoneyInvest March 6, 2012: 9:49 AM ET

NEW YORK (CNNMoney) -- BlackRock president Robert Kapito is walking the firm's talk.

Kapito, who helped found the world's largest asset management firm, now has about 70% of his investment assets in dividend-paying global companies, and 30% in high-yield corporate bonds.

Those are both cornerstones of BlackRock's new "Investing in a New World" initiative, which encourages investors to get out of idle cash and find assets that generate income in a slow-growth, low-rate environment.

Americans had a record $10 trillion deposited in their bank accounts at the end of 2011, noted Kapito. And with the Federal Reserve holding interest rates near historic lows, that cash is earning virtually nothing.

"People need to rethink the cost of cash, and think about income," said Kapito. "They're worried they don't earn enough and won't have enough to retire on, but the longer they sit in cash, the longer they'll have to work and they won't be able to retire when they want to."

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Kapito said investors are much better off investing in dividend-paying stocks, which return between 3% and 5% a year, and so-called junk bonds, which yield between 5% and 6%. Both offer better returns than Treasuries, he added. The 10-year government note currently pays only about 2%.

High-yield bonds have been extremely popular among income-hungry investors this year. BlackRock's iShares iBoxx High Yield Corporate Bond ETF (HYG) has raked in more than $3 billion so far in 2012, almost as much at the total amount of assets it brought in during all of 2011.

For dividend-paying stocks, Kapito said investors can gain exposure through individual companies, like AT&T (T, Fortune 500), Pfizer (PFE, Fortune 500), Verizon (VZ, Fortune 500) and Johnson & Johnson (JNJ, Fortune 500), or buy shares of an ETF like the iShares High Dividend Equity Fund (HDV), which launched last year and includes all of those companies and others like Procter & Gamble (PG, Fortune 500), Merck (MRK, Fortune 500) and Intel (INTC, Fortune 500).

Kapito said he also likes to invest in municipal bonds, particularly those issued in his current hometown of New York City, since those yield about 4% and are exempt from income taxes.  To top of page

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