Dear Mr. Berko:

H.B., Akron, Ohio

Dear H.B.:

Annuities, annuities, annuities! Holy Moses, Mary, Mark and Luke; it seems that every broker wants to sell us an annuity. I can understand why. The commissions range between 6 percent and 12 percent, the annual fees (mortality, management, bookkeeping, etc.) range between 2.5 percent and 4 percent, and the selling broksters also get a slice of those fees each year called a “trail commission.” Most annuities are painted by your broker to look like peacocks, but after you’ve owned them for a while, they begin to molt and look like sparrows. Now H.B., please ask that salesman to carefully explain how ING (a fine company) can pay 6 percent a year. And be mindful that your ING annuity must earn 9.25 percent yearly (after subtracting its 3.25 percent in annual fees) in order to pay you 6 percent. The only people in this country who earn 9.25 percent a year on their investments are members of Congress, retired members of Congress and members of various state legislatures.

Selling Johnson & Johnson (JNJ-$69.52) is a bad idea. Admittedly, the stock price hasn’t done diddly squat, but I’m going to give you a guaranteed maybe that in the coming four to six years, JNJ’s stock price could be 50 percent higher than it is today. Another reason to hold JNJ is its ample $2.44 dividend yielding 3.5 percent. And though 3.5 percent “ain’t” hot, it’s certainly a lot better than many other alternatives. And another reason to continue holding JNJ is its dividend growth. When you bought JNJ, the dividend was $1.20 a share, and seven years later, it has doubled to $2.44. And in the coming four to six years, considering the passage of the Patient Protection and Affordable Care Act (I question the word “affordable”), it’s a reasonable expectation to imagine a JNJ dividend in the neighborhood of $3.50. There are 32 analysts who cover JNJ, and not one of them recommends it be sold. I don’t care for your broker’s advice.

Now Vanguard’s Dividend Appreciation ETF (VIG-$58.21) yielding 2.1 percent is an oxymoron and a sad excuse for an income investment. The dividend, which has been up and down and up and down, is unattractive, and its niggardly appreciation suggests that VIG’s management spent its founding days in a dark room growing mushrooms, not dividends. Even the name is misleading. Vanguard has taken poetic license with the word “appreciation,” and the “always late for dinner” dunderheads at the SEC should demand its name be changed. Sell this junk! It’s not doing what it advertises to do.

And when you sell VIG, call T. Rowe Price and buy its High Yield Tax Free Fund (PRFHX-$11.77) with a 4.54 percent current yield. If you are in the 25 percent tax bracket, 4.54 percent is equal to a 6 percent taxable return. And because taxes are certain to rise significantly with the passage of the Affordable Care Act, an increased demand for tax-free income should cause municipal bonds to increase in value. PRFHX pays a monthly dividend of .043 cents, and T. Rowe Price will send you checks (no cost) that can be used to pay for extrinsic purchases. And if there’s room in your portfolio, consider owning Kinder Morgan Management LLC (KMR-$77.57) yielding 7.8 percent and Energy Transfer Partners LP (ETP-$45.46), yielding 7.9 percent. Both have favorable tax treatment.