What stocks do I recommend?

Following are the components of my portfolio:

Bond ETF's in order of maturity

BKLN/VVR  floating rate corporate debt
CSJ       Short maturity investment grade corporate bond
LQD     Long maturity investment grade corporate bond
HYG/JNK  mid to long maturity high yield (meaning "junk") bond
MHN    Long maturity NY muni bond

Stock ETF
PFF       Preferred stock portfolio (heavily weighted to financial companies)
SPY      S&P 500 Index fund

ETF's are exchange traded funds.  In their best usage, they can be cost efficient ways to get exposure to a diversified portfolio of assets.  For example, MHN is a mainly NY based muni bond fund that buys longer maturity bonds and boosts it's yield buy borrowing money in the short (1 week) duration and buying even more longer term bonds.  The net effect is it yields over 6% tax free in NY State, which to my thinking is an excellent return.  Aside from municipal default, the risk is that short term rates go up dramatically and the fund can no longer borrow at attractive rates.  Given that I think we are in a protracted neutral market environment, I believe this risk to be low.  The ETF structure is very helpful here because I can buy any odd amount of municipal exposure and it will be a diversified portfolio.  I'm willing to pay a fee for the convenience and diversification.  The alternative of finding individual bonds  and expense of buying "odd-lots" or small pieces of bonds would be higher than the fee I am paying to manage the portfolio.

FEES ARE THE ENEMY 
Some ETF's can be costly in terms of the management fee - one should do their homework in determining what the fee is.  It can be found in the "prospectus" or in any of the financial websites like Yahoo or my favorite www.Bloomberg.com  As a rule of thumb, I look for fees less than 0.5%.  If I pay more than that, I would be looking for particular savings elsewhere.  The MHN ETF is in that camp.  Remember that we are looking for somewhere around 2% over inflation.  If I pay 1% in fees that makes the hurdle even higher!

The SPY is an attractive way to buy market exposure because they charge less than 0.1% to manage the portfolio.

BEWARE LEVERAGE
All of the above securities pass my test for value in providing exposure.   But there are many ETF's which are very risky.  Highly leveraged ETF's are really short term trading vehicles because the cost of maintaining the leverage will erode value over time.  Don't fall for these instruments as a long term investor.  Some others charge high fees but don't really actively manage the portfolio.  If you are paying 1% management fee, there should be some reasonable activity and outperformance versus their stated benchmark (rare).

BEWARE HIGH YIELDS
Yields can be high for a variety of reasons.  Usually if something seems too good to be true, it is.  There is risk involved.  Leverage (borrowing) is one obvious one, less obvious is the risk that the dividend it about to be cut because the underlying portfolio does not support the payout.  It pays to investigate.

BEWARE TRADING COSTS
Always review the daily trading volume (not jus the average) to see how much is trading.  Ideally you want to see volume every day and a good amount each day.  Another reflection of poor trading volume is what is called the bid/ask spread.  This is the difference between the "bid" price- the price you can sell a given amount of shares immediately and the "offer or ask" price which is the price at which you can buy shares immediately.  Check out in percentage terms what the spread is an make sure you are comfortable. A high spread menas that it will be costly to get out of your position if you change your mind or you need liquidity.