6 replies to this topic

[calmcookie]

Have never looked at bond funds before, but some money still sitting in MM account. Certain bond funds are offering about 7% (beats 5% in MM account). What is the risk with these? Are they decent for short term holds? Any comments welcome. Thanks in advance, C.C.

Edited by calmcookie, 11 April 2007 - 11:21 AM.

[vitaminm]

Which MM yields 5%?


PRHYX / 7.19% yield / Even junk beats index in 2000-2001-2002

http://finance.yahoo...yx ^G...0&a=&c=


ANNUAL TOTAL RETURN (%) HISTORY

http://finance.yahoo.com/q/pm?s=PRHYX

http://finance.yahoo.com/q/pm?s=vfinx

Edited by vitaminm, 11 April 2007 - 11:47 AM.

[calmcookie]

Which MM yields 5%?


PRHYX / 7.19% yield / Even junk beats index in 2000-2001-2002

http://finance.yahoo...yx ^G...0&a=&c=


ANNUAL TOTAL RETURN (%) HISTORY

http://finance.yahoo.com/q/pm?s=PRHYX

http://finance.yahoo.com/q/pm?s=vfinx

Part of my IRA is currently in a MM account at Fidelity - supposedly earning just under 5% ... so they told me this morning.

Thanks for other info ... will look at it.

C.C.

Edited by calmcookie, 11 April 2007 - 12:54 PM.

[TechSkeptic]

Hi cookie, As in any other type of investment, the return in bonds is commeasurate with risk. You can actually lose money in bond funds due to interest rate fluctuation (which as you know makes the market value of bonds go down). And of course when buying junk bonds (or any type of bond other than US Treasuries), you have credit risk on top of that. When selecting a bond fund, it's important to know the average duration of bonds in the fund. If it's relatively short (like 2-3 years), there is relatively less interest rate risk than buying funds of longer average duration. Personally, my opinion is that bonds in general do not have the best reward/risk tradeoff of available investments these days, since long-term interest rates are still not much above historic lows, and the yield curve is pretty flat. So the relative benefit of bond funds vs. money market is not that great when you consider the additional risk. That's just my opinion, others here like greenie are bullish on bonds because they see a recession coming. So take this for what it's worth. Best, TS

Edited by TechSkeptic, 11 April 2007 - 02:50 PM.

[TechSkeptic]

One more thing about junk or high-yield bonds, they have a risk/reward profile somewhere in between the stock market and government bonds, and they correlate partially to both. A fund like PRHYX, while not something you want to put all your savings in, might be a nice return-kicker for a portion of your funds. Gary Smith, a well-respected trader on this board, likes (or at least used to like) junk bond funds because they tend to trend more nicely than stock indices do. So it's easier to know when to get out without being whipsawed. If you want to know more about trading junk bond funds, read Gary's book, as I remember he has a whole chapter on them.

Edited by TechSkeptic, 11 April 2007 - 03:04 PM.

[calmcookie]

TS - Thanks so much for your thoughtful reply. Some interesting info. And yes, I respect Gary's point of view ... will hunt down his book. Plan to sort all this out so I can get back to my real job ... the fun part ... writing POETRY!! Best to all, C.C.

Edited by calmcookie, 11 April 2007 - 04:12 PM.

[vitaminm]

http://biz.yahoo.com/p/tops/hy.html