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.
So, what other asset classes might provide relief to beleaguered investors in search of steady income and safety of capital in 2009? A growing number of experts suggest the following four asset classes may indeed fill that bill. We will discuss the first three. The fourth was already published; see the link 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. Yields on mortgage-backed securities have been declining ever since the Federal government November 2008 announcement that it would purchase up to $500 billion of Ginnie Mae, Freddie Mac and Fannie Mae home mortgage-related bonds. But with the purchases just beginning in January, current yields of this battered asset class still look attractive relative to historical levels. Also, with the Fed's intervention, mortgage-backed securities now offer effectively the same Federal guarantee as U.S. Treasuries, but with higher yields. Consider iShares Barclays MBS Bond Fund (MBB), iShares Barclays Agency Bond Fund (AGZ) and SPDR Barclays Capital Mortgage Backed Bond ETF (MBG).
The TIPS products, Treasury Inflation Protected Securities, are impacted by inflationary or deflationary trends. Recent fears about deflation have negatively impacted TIPS prices, but this may present a good time to buy TIPS. Looking forward, with many believing our Federal stimulus packages will result in substantially higher inflation, TIPS may appreciate. TIPS really shine during inflationary periods. Advisors currently are suggesting (TIP) iShares Barclays TIPS Bond Fund and (IPE) SPDR Barclays Capital TIPS.
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.
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.
What about safety of principal? For investors wanting more assurance, (PRB) Market Vectors Pre-Refunded Municipal Index ETF may be the hot item. This ground-breaking ETF invests only in pre-refunded municipal bonds. The collateral for these bonds are U.S. Treasury securities which means they are the only municipal bonds fully backed by the U.S. Government.
The fourth asset class we reviewed for safer retirement income is the investment grade corporate bond approach. At their current prices, corporate bonds are still a bargain. We are witnessing portfolio managers, insurers and brokers loading up on high grade corporate bonds because they believe that the government bailout programs may lead to fewer corporate defaults. For more details on the corporate bond funds strategies, read the www.AboutETFs.info article on 15 asset classes at this link: http://www.aboutetfs.info/Monthly-Income-Strategies.php .
To summarize, when looking for relative safety and higher income returns, the four classes mentioned above appear to be the favored bet. Looking forward, we will also comment on preferred stocks and senior loans.
Strategies mentioned in this article carry no guarantee or implication of success. There is no solicitation to buy or sell securities implied or suggested by Alpine Strategies or its staff. Your decisions to act upon our opinions should be carefully weighed based upon your investment objectives, and you should consult with a professional advisor prior to making any investments. - 23802
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.
So, what other asset classes might provide relief to beleaguered investors in search of steady income and safety of capital in 2009? A growing number of experts suggest the following four asset classes may indeed fill that bill. We will discuss the first three. The fourth was already published; see the link 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. Yields on mortgage-backed securities have been declining ever since the Federal government November 2008 announcement that it would purchase up to $500 billion of Ginnie Mae, Freddie Mac and Fannie Mae home mortgage-related bonds. But with the purchases just beginning in January, current yields of this battered asset class still look attractive relative to historical levels. Also, with the Fed's intervention, mortgage-backed securities now offer effectively the same Federal guarantee as U.S. Treasuries, but with higher yields. Consider iShares Barclays MBS Bond Fund (MBB), iShares Barclays Agency Bond Fund (AGZ) and SPDR Barclays Capital Mortgage Backed Bond ETF (MBG).
The TIPS products, Treasury Inflation Protected Securities, are impacted by inflationary or deflationary trends. Recent fears about deflation have negatively impacted TIPS prices, but this may present a good time to buy TIPS. Looking forward, with many believing our Federal stimulus packages will result in substantially higher inflation, TIPS may appreciate. TIPS really shine during inflationary periods. Advisors currently are suggesting (TIP) iShares Barclays TIPS Bond Fund and (IPE) SPDR Barclays Capital TIPS.
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.
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.
What about safety of principal? For investors wanting more assurance, (PRB) Market Vectors Pre-Refunded Municipal Index ETF may be the hot item. This ground-breaking ETF invests only in pre-refunded municipal bonds. The collateral for these bonds are U.S. Treasury securities which means they are the only municipal bonds fully backed by the U.S. Government.
The fourth asset class we reviewed for safer retirement income is the investment grade corporate bond approach. At their current prices, corporate bonds are still a bargain. We are witnessing portfolio managers, insurers and brokers loading up on high grade corporate bonds because they believe that the government bailout programs may lead to fewer corporate defaults. For more details on the corporate bond funds strategies, read the www.AboutETFs.info article on 15 asset classes at this link: http://www.aboutetfs.info/Monthly-Income-Strategies.php .
To summarize, when looking for relative safety and higher income returns, the four classes mentioned above appear to be the favored bet. Looking forward, we will also comment on preferred stocks and senior loans.
Strategies mentioned in this article carry no guarantee or implication of success. There is no solicitation to buy or sell securities implied or suggested by Alpine Strategies or its staff. Your decisions to act upon our opinions should be carefully weighed based upon your investment objectives, and you should consult with a professional advisor prior to making any investments. - 23802
About the Author:
Chance Carson ownsAlpine Strategies in Colorado Springs, Colorado. Chance serves as editor of AboutETFs.com, an educational Web site for retired investors, and http://www.AboutETFs.info , an exchange-traded funds research report website that features complimentary monthly income strategies. He welcomes your comments and suggestions: write to ChanceCarson@AboutETFs.com .
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