Investing Risks

One risk of investing in large dividend-paying companies is that they could continue to lag behind the stocks of smaller companies and highly leveraged companies, meaning ones with high debt levels, said GMO's Grantham.

"We don't expect these quality income equities will keep up with the broad market if we get a market that's up 20% this year," said Atlanta-based Rex Macey, chief investment officer for Wilmington Trust Corp., the Wilmington, Del.-based bank that is merging with M&T Bank Corp. Leverage can improve certain performance measures such as return on equity because it allows companies to operate with less equity. Wilmington manages $27 billion on behalf of wealthy families.

Investors have been moving from money-market funds back into mutual funds. On Feb. 16 there was $2.8 trillion in money- market funds, down $83 billion from early December, according to the Investment Company Institute, a mutual fund trade group. Investors put $23 billion into stock mutual funds in January, the biggest monthly inflow since February 2007, Morningstar said.

Bigger Stakes

Bel Air Investment Advisors, which manages Moreno's investments, has increased clients' stakes in stocks and other growth investments by 10% to 20% over the past several months, said Todd Morgan, senior managing director. Los Angeles-based Bel Air clients have $20 million or more in assets and its founders have a combined 57 years of experience with Goldman Sachs Group Inc.

Moreno, who lives in Houston, said he likes the safety and growth potential of companies such as United Parcel Service Inc. that have good balance sheets and predictable dividend streams.

Companies with low debt levels and significant sales in emerging markets, such as 3M Co., offer attractive prospects, said Gary Flam, a portfolio manager for Bel Air, which has $5 billion in assets under management. Shares of 3M returned 13% and UPS returned 14% over the past six months.

"The strong balance sheets, large cash balances, dividend payouts, multinational revenue streams and relatively cheaper valuations make these 'blue-chip' stocks attractive," said Brent Fykes, senior investment partner for GenSpring, the largest U.S. registered investment adviser, based in Palm Beach Gardens, Florida.

Selling Bonds