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| Four Safe Money Strategies for Retirees in 2009 By Chance Carson |
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| Written by Chance Carson |
| Monday, 27 April 2009 08:27 |
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The tail-end of 2008 left most investors frustrated. One of the few beacons of hope appeared to be U.S. Treasury bonds. Retirement-oriented investors still wonder where to go next for better returns. It seems the popular place to look for answers in 2009 is in Treasury products. However, experts such as Mohamed El-Erian, Pimco Chief Investment Officer, and Andrew Bary, popular finance author, recommend staying away from those instruments as the price-yield equation is not that attractive. See the Barrons article (search for http://online.barrons.com/article of January 5, 2009) entitled Get Out Now. If Treasury products are no longer optimal, what other choices are appealing for the weary investor in 2009? Many advisors and experts are now pointing to four classes of assets that deserve your attention. This article focuses on the first three; the fourth one is discussed on a separate link listed below. 1. Mortgage-Backed Securities 2. Treasury Inflation Protected Securities (TIPS) 3. Municipal Bonds 4. High-Grade Corporate Bonds (reviewed in the AboutETFs.info article regarding 15 Best Asset Classes: http://aboutetfs.info/Monthly-Income-Strategies.php 1. Mortgage-backed securities have experienced declining yields after the Federal government decision to buy upwards of 500 billion dollars of mortgage bonds from Fannie Mae, Freddie Mac and Ginnie Mae. Taking a historical perspective, current yields are still enticing. Also, consider that these instruments carry essentially the same Federal guarantee as Treasuries while offering higher yields. With that in mind, look into (MBB) iShares Barclays MBS Bond Fund, (AGZ) iShares Barclays Agency Bond Fund and (MBG) SPDR Barclays Capital Mortgage Backed Bond ETF. 2. Treasury Inflation Protected Securities, or TIPS, may react to fears of inflation that have recently shifted to forecasts of worldwide deflation. This reversal in sentiment has sent TIPS prices plummeting and has driven yields higher. There is the strong possibility during the next several years that burgeoning Federal stimulus programs will lead inflation higher. TIPS will thrive as inflation heats up. With other expert forecasts published about TIPS, take a careful look at iShares Barclays TIPS Bond Fund (TIP). Also, consider SPDR Barclays Capital TIPS (IPE). 3. Tax-free Municipal Bonds are approaching attractive levels compared to US Treasuries. For example, investment grade munis with their current 4-5% tax-free rates, are comparable to taxable yields on certificates of deposit that pay 6-7%. Among the worthy products to consider are the following: (PZA) PowerShares Insured National Municipal Bond Index Fund, (TFI) SPDR Lehman Municipal Bond ETF and (MUB) iShares S&P National Municipal Bond Index Fund. For state-oriented bond choices, California may significantly benefit from Federal stimulus spending geared to infrastructure. If so, the iShares S&P California Municipal Bond Fund (CMF) looks like a good bet. California is likely to be high atop the list of states receiving more Federal assistance due to its political clout and economic size. If your overriding priority is safety, you should look into (PRB) US Market Vectors Pre-Refunded Municipal Index ETF. This ETF uniquely invests only in pre-refunded municipal bonds. These bonds are issued to pay off existing bonds with higher rates and have the equivalent of a full US government guarantee of interest and principal. 4. Investment Grade Corporate Bonds offer great value at current prices. Many investment fund managers are buying up corporate bonds on the assumption that bailout and stimulus programs will lead to fewer corporate defaults. For a more complete picture, read The 15 Best Asset Classes in 2009 for High Yielding, Secure Retirement Income in the strategy section of http://www.AboutETFs.info. In future articles, we may examine two additional income-producing asset classes: senior loans and preferred stocks. But for now, your best bets for principal safety and steady income seem to be mortgage-backed securities, Treasury inflation protected securities (TIPS), municipal bonds and high-grade corporate bonds. As always, results are not guaranteed and these strategies may not be suitable for your personal investment objectives. You should consult with a professional before buying or selling any securities. This article is not intended to be investment advice for the purchase or sale of any mentioned securities. About the Author: Chance Carson is president of Alpine Strategies in Colorado Springs, Colorado. He also is the editor of AboutETFs.com, an educational Web site for retired investors, and http://www.AboutETFs.info , an exchange-traded funds article and reports website that features complimentary monthly income strategies. He welcomes your opinions and thoughts. Write to ChanceCarson@AboutETFs.com . Kindly provided by LJ-Marketing.dk You are welcome to use this article on your own website, if you include the link just before this text. |
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