Last year was not a good year for most investments except for US Treasury Bonds. For retirement-oriented investors, the question remains as to what to do next. Many people wonder where decent rates of return can be found with minimal risk.
Although many seem to lean toward Treasury investments, they may now be priced too expensively. Chief Investment Officer Mohamed El-Erian of Pimco and popular financial columnist Andrew Bary both advise people to stay away from treasury bonds for a variety of reasons best outlined in a Barrons article, Get out now, published January 5, 2009 (search for title at: https://www.agkidzone.com/).
With Treasuries out of the picture, what other asset classes offer any hope for this year? Our research, and others commenting on this situation, point to four investment classes. We have already published an article on the fourth one, so we will concentrate on the first three. Here are all four classes we have examined.
* Securities backed by Mortgages * TIPS: Treasury Inflation-Protected Securities * Municipal Bonds * Investment-Grade Corporate Bonds: refer to the AboutETFs.info article at https://www.agkidzone.com/
Yields on mortgage backed securities have been declining ever since the Federal government announced its intent to buy more than $500 billion in bonds from Fannie Mae, Freddie Mac and Ginnie Mae. Despite recent Treasury purchases in January, 2009, current yields still compare well to past yields.
Remember that mortgage securities offer the equivalent protection of U.S. Treasuries, but they produce higher yields. Attractive opportunities include (MBB) iShares Barclays MBS Bond Fund, (MBG) SPDR Barclays Capital Mortgage Backed Bond ETF and (AGZ) iShares Barclays Agency Bond Fund.
2. At the moment, TIPS prices are headed lower with fears of deflation. However, if the Federal stimulus packages prompt inflation, as many believe, TIPS will correspondingly produce better results. You will likely read many other articles on TIPS, so pay close attention to these two products; (TIP) iShares Barclays TIPS Bond Fund and (IPE) SPDR Barclays Capital TIPS, both on the NYSE.
As for tax free municipal bonds, they are yielding higher levels than usual. Although they hit low prices in November of 2008, they are still showing strong value when compared to U.S. Treasuries.
When you consider that investment grade municipal bonds produce tax fee distributions of 4-5%, they equate to taxable Treasury bonds distributing 7.4% in a 35% tax bracket. With that in mind, here are a few ETFs to consider: (MUB) iShares S&P National Municipal Bond Index Fund, (PZA) PowerShares Insured National Municipal Bond Portfolio and (TFI) SPDR Lehman Municipal Bond ETF.
Investors also may look to regional choices. California is arguably one of the prominent arenas for political and economic opportunity. With the advent of stimulus packages earmarked for infrastructure, one could anticipate more Federal assistance for California. One offering to investigate is Barclays (CMF) iShares S&P California Municipal Bond Fund.
For the ultimate in credit safety, look at Market Vector's Pre-Refunded Municipal Index ETF (PRB). PRB is the first ETF investing 100% in pre-refunded municipal bonds. Pre-refunded municipals are issued to pay off existing, higher yielding bonds. These bonds are fully collateralized by U.S. Treasury securities, making them the only municipal bond class 100% fully guaranteed by the U.S. government.
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 summary, the four classes we mentioned here may suit your style for retirement-oriented, safer investments for 2009. We are presently researching preferred stocks and senior loans as other options for retired investors. Stay tuned to our websites for those articles and reports.
Investors are reminded that our commentary does not guarantee results. Choices mentioned in this article do not imply specific investment advice for an individual and they may not suit your objectives.
Alpine Strategies and its officers and staff are not soliciting the sale or purchase of any securities in this article. Our comments are based on opinions which may change at any time. You should perform due diligence and consultation with a professional prior to the sale or purchase of any investment security.
Also Visit: agkidzone.com