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Subject:  Re: Diversification in Fixed Income Investments Date:  7/20/2010  12:00 PM
Author:  joelcorley Number:  31088 of 36218


You wrote, For this portion of my retirement portfolio, I don't want to take on any risk. For risk-free investments, however, I thought that some probably perform better at particular times and others at other times and that was a reason to diversify. (And CDs seem now to have low interest rates.)

If you're looking for better yields and want to preserve your capital, I'd stick with CDs and maybe try out Ally Bank. Their 5-yr CD is paying 2.94% APY. Better yet, you can cash them out and only pay a 2-month interest penalty, making it practical to break the CD to get a higher rate once rates rise significantly.

CDs have one advantage over Treasuries - you can recover most of your principal without experiencing interest rate risk (decline in market price). At least that's true for CDs that are not brokered (bought through your stock broker) - brokered CDs have the same interest rate risks as Treasury or Agency bonds, since the only way to recover principal early is to sell them instead of redeem them.

- Joel
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