Get better returns without investing in the stock market

A1m0s |

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Interest rates cannot go any lower. CD's and treasuries are paying very low rates. Just about anything short term is paying less than 2 percent.

One could buy long and intermediate term bonds right now but as interest rates rise how happy are you going to be holding a 3.5 percent bond when the going rate is 7 percent or more?

Long and intermediate term bond funds are going to fall in value as interest rates rise. Given where rates are now I would have a hard time owning these funds as fund values will fall.

To get more return you may consider these alternatives with a little more risk.

Short term bond funds: In a rising interest rate environment you want to keep your duration on your bonds as short as possible. My recommendations on these funds are as follows:

Janus Short-Term Bond fund symbol JASBX. Year to date from Jan 1 to September 30, 2009 this fund is up 7.37%. This fund has never lost money in a given year.

PIMCO Low Duration bond symbol PLDDX. Year to date from Jan 1 to September 30, 2009 this fund was up 11.44%. This fund lost 1.58% last year.

High yield bonds funds. High yield bond funds do well when the economy is doing well or improving. In 2008 these bond funds took a real hit in the credit crunch. Year to date they have done very well. In my opinion these funds should do well over the next few years. I would not expect to see returns that were seen on these funds so far this year but I would expect to see nice gains.

Recommendations in the High Yield sector are:

Artio Global High Income symbol BJBHX. Year to date from Jan 1 to September 30, 2009 this fund is up 47.10%. This fund had a loss last year of 24.17%

Janus High Yield fund symbol JAHYX. The year to date from Jan 1 to September 30, 2009 this fund is up 33.74%. This fund had a loss last year of 19.32%.

These funds have a strong upside potential however you must be able to accept the magnitude of losses seen in 2008.

Other funds:

PIMCO Foreign Bond Fund PFODX. Year to date from Jan 1 to September 30, 2009 this fund is up 16.49%. This fund had a loss in 2008 of 2.82%.

Another option is an arbitrage fund, the Gabelli ABC fund, fund symbol GABCX. This fund was down 2.63% in 2008. Year to date from Jan 1 to September 30, 2009 this fund is up 4.76%. This fund has averaged nearly 7% since its inception in 1993.

Also in this class is the Arbitrage Fund Class R. This fund lost 0.64% in 2008. Year to date from Jan 1 to September 30, 2009 this fund is up 8.54%. This fund has averaged just over 6% in almost 10years.

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Comments

Nov 6, 2009 12:17am

Leeia
Great info! but have you heard of ally bank? well I just open up account with them and I got the money market at 1.65 and the on line savings at 1.70 so that's not bad.

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