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My mother is 80 and in excellent health. She has about 350-400K invested in CD's, living off the interest and her social security. She wants to maintain her principal to leave to family on her death. Recently her bank has been trying to talk her into an annuity. I don't think that is the best way for her to go. She wants safety and retention of principal while generating current income. Any suggestions other than CD's I can give her. Thanks.
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Would recommend a good quality corporate bond fund, it
should give sufficient supplemental income to live
comfortably, without touching her capital. - - Matthew
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In periods of rising interest rates, corporate bond funds will lose value.

Although I wouldn't personally invest in 100% CD's, the lady is 80 and the CD's are producing enough income to live on. She is also insecure about principal safety.

Another conservative investment to review would be be corporate bonds or U.S. Treasuries.


*Cat
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Since she wants absolute safety of principal, how about laddered U.S. Treasury bonds through a Treasury Direct account?
Chris
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The yield from treasuries is low and may yield
insufficient income. It is true corporate bond funds
asset value, will vary somewhat with the market but
no where as much as common or preferred stock. The
nice part is the fixed income comes in twice a year!
Admittedly, a poorly managed fund could fail to be
savy enough to switch bond holdings when market
conditions dictate - thats what management fees are
suppose to reflect. I was careful to emphasize a
WELL managed fund in my posting. Bear in mind, when the
bonds go to maturity you do get back 100cents for each
dollar of face value.
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Agree. I look for bonds that have short maturity maturity dates (usually less than 5, but I'll go to 7 in some cases). Also, it is nice to find plays in areas where I would like to invest or think may turn around but it may take some time. Current bond holdings include Silicon Graphics, Alza and Inco. I also have some Pilgram Prime Rate Trust. PPR holds a diversified portfolio of mostly B or BB companies. BUT these are Senior Notes, i.e., backed up by equipment or real estate. I didn't look it up today, but the yield usually runs around 8.5%. PLUS, if you reinvest the dividend it invests at a half percent below the market value--giving you a real yield of 9% or so with very little risk. I also do preferred stock. A recent purchase was St.Paul Companies--an insurance company with a brokerage component.
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I forgot to note that the bonds and preferreds that I buy are mostly convertibles. I decrease the risk by diversification.
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<< I also have some Pilgram Prime Rate Trust. PPR holds a diversified portfolio of mostly B or BB companies. BUT these are Senior Notes, i.e., backed up by equipment or real estate. I didn't look it up today, but the yield usually runs around 8.5%. PLUS, if you reinvest the dividend it invests at a half percent below the market value--giving you a real yield of 9% or so with very little risk. I also do preferred stock.>>

Do you have these in a self-directed IRA? How do you buy them?
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I look for turn around situations and study them really
carefully, the risk is higher but yield is much better.
My current first choice is Wickes 11 5/8 of 03, selling
at apprx. $85 and yield is 13.6%. I was was in the
forest products industry and have been watching this
one for > 5 years. Its not for the faint hearted but
it was upgraded by Moody's from neutral to positive
12/31/99. Good Hunting in '00 - Regards - Matthew
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I have bonds in rollover IRA's and some in a cash a/c
at Smith Barney. I will consider buying in TDWaterhouse
Roth in the future. These are all all self directed,
I prefer to make my own mistakes!
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DOK. Sorry, I forgot to answer your last question.
I have broker at Smith Barney I have worked with for 10 years. I tell him how many bonds and what price I will
pay. He negociates thru' their bond Desk. I was advised
by Waterhouse they plan to start on-line bond trading this year. - - Matthew
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