Date: Sat, 23 Jul 2005 13:53:34 CST
From: "Elle" 
Newsgroups: misc.invest.financial-plan
Subject: Re: Rate My Fund Picks Please
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Cindy Liu  wrote
snip
> My husband & I are just 8yrs away from retirement.  We've managed
> to save 220K that we've kept in some different mutual funds.
> We have been looking at the safest possible investments in the bond
> area.

Have you considered a bond ladder instead of an investment grade (IG) bond
mutual fund?

By some measures the ladder is a safer investment than the fund. Many feel
we are in a rising interest rate environment right now. As interest rates
rise, the principal of your IG bond fund investment will decline. For
example, DODIX is a mostly IG bond fund (with a bit of junk thrown in, which
helps the yield), of intermediate duration. Its NAV will decline as interest
rates rise, meaning that the principal you invest right now will decline. By
buying into an intermediate term IG bond fund now, you lock in a certain
absolute dollar yield. With a bond ladder, you lose no principal, and the
yield rises as interest rates rise. You do have to have a little discipline
insofar as cashing in parts of the bond ladder. I would think that would not
be a problem at your age.

FOHFX behaves similarly.

If you keep funds like DODIX and FOHFX a very long time, then the advantage
of enormous diversity that they offer may easily outweigh your losing some
principal.

I estimate you could lose around 10% of principal with these funds, based on
their historical charts.

> fohx - ohio, municipal bonds around since 1990

Is this a typ-o? Do you mean FOHFX?

> dodix - dodge and cox bond fund
> hadbx - managed by bill gross

I can't find any fund that uses the symbol "hadbx."

Try getting some experience with mutual fund screeners like those at
finance.yahoo.com and www.morningstar.com

> Do these seem like investments that would be safe for the coming years
> if we hit hard times yet again?

Investment grade bonds are considered the ideal diversification tool for a
portfolio otherwise consisting of stocks. Very generally speaking, when
stock returns are poor, bond returns are good, with the only caveat being
when bond funds are purchased when interest rates are near record lows, as
they are now.