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Author: rkmacdonald Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 19483  
Subject: Re: UTILITY STOCKS Date: 11/6/2001 8:50 PM
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Author: carcart Date: 11/6/01 2:29 PM Number: 7469
I am retired and have a 60,000.CD maturing. I am interested in income produced and it has been suggested that I buy utility stocks since they offer a good return with minimum risk. Is there a utility index mutual fund? I would appreciate any advice.

I'm certainly no expert on utilities, but I do know that they are not as safe as they used to be. I just checked the diversified utility index, and see that it is down 21% year to date!! That's far more volatility than I remember from the utilities I owned 20 years ago.

I also see that most utility funds are generating only about 3% in dividends, so that won't help you much. The Vanguard Utility Fund, VGSUX, is yielding 4% and is down about 20% year to date.

So, it is clear that utilities are much riskier than your CD.

If you really want to maintain "minimum risk" as you said in your post, you would probably be better off in Treasuries. Recent 10 year notes are yielding around 5% to maturity, and they are just as safe as your CD.

For a little more risk, but still pretty safe, you might think about corporate bonds. You can still buy investment grade bonds on the secondary market (via a broker) that yield 7% to maturity. These are slightly more risky than your CD, but if you buy several different bonds, you can mitigate that risk quite a bit. I buy my bonds at the online brokerage, www.etrade.com .

Russ
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