Get better returns without investing in the stock market

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.