I have recently read an article on Bank-Loan Funds. The author recommended these funds as a hedge against an overall stock market drop-out. He also gave some examples of such funds----SAMBX and FFRHX are two with fairly low expenses. Given their junk-bond involvement where is the wisdom of putting part of my "egg" in there to spread my risk out. I have a lot of money in global investments--around 60%---and only about 20% in balanced funds with remainder in spread of growth large cap and I hate to take any out to get single digit returns unless there is a good reason---seems to me that CD's or Govmt bonds would be safer and return about the same. At 66 yrs, I don't exactly want to weather out a global bubble burst which I tend to think is probable. I keep going back to the Motley Fool contrast between the "saver" and the "retiree." Would like some views on this please. ----JG

"return about the same"

I recommend you check your info on that.

http://quicktake.morningstar.com/fundnet/Snapshot.aspx?Country=USA&Symbol=XSIAX

yield 6.6

http://quicktake.morningstar.com/fundnet/Snapshot.aspx?Country=USA&Symbol=XPITX

yield 7.7

I don't know enough off the top of my head to say whether or not these will help reduce the overall risk in your account but there is no question that they have higher yield than cds or govt bonds.

Thanks for your perspective but I still maintain that we have single digit annual returns for higher risks than other single digit instruments. AM I missing something?
----JG

You might be interested in this:

Fixed Income -- Juice Your Returns

As of the time of this writing, Justice Federal Credit Union of Washington DC had a 6.25% APY 2-year CD and a 6.35% APY for amounts of $100K or more. In order to qualify for membership, however, you may need to join the National Sheriffs Organization at a one time cost of $35, which would lower your APY by 0.02% for a $100K amount.

Alliance Bank in Culver City, California, has a deal I'm pretty excited about. It's a 3 year IRA CD that pays a variable rate of prime minus 1.5%. With compounding, that equates to an incredible 6.98% APY! Booyah! Sure the rate could go down, but this CD only has a 3 month surrender charge.

http://indexuniverse.com/index.php?option=com_content&view=article&id=2813&Itemid=30

The article also mentions a few other places with track records of high CD rates such as Pentagon Fed.

Paul

but I still maintain that we have single digit annual returns for higher risks than other single digit instruments

Over a 20-30 year period, the difference between 6% and 8% is huge.

All risk and return is relative, regardless if it is 6% on FDIC or 8% on bonds or 10% on stock.

Perhaps you should determine the sharpe ratio for the investments and then you might have a better idea as to which are best for you.

I just called Justice federal and they said they are not offering anything close to this rate. Do we know what is going on there.

At 66 yrs, I don't exactly want to weather out a global bubble burst which I tend to think is probable.

It depends when you expect to retire (or if you are already?), but it sounds to me like you may be in too aggressive investments for your comfort level at this point in your life. Since this is likely money that you will expect to tap in less than 10 years (and possible less than 5) a good amount of it should start to be in more conservative investments, including cash and bonds.

You shouldn't be worrying about a global bust because you should be aware that you have at least the money you'll need for the next 10 years or so in investments that won't be affected by it.

For instance, lets say you plan to retire in 2 years, and will need about $20K per year beyond social security and any pension, annuity, etc. Then you should probably have 8 * 20 = $160K in some form of cash, bonds, CDs, etc. That way you can know that even if everything went to heck today, you'd have until 2017 before it made a lick of difference to you.

The numbers are very approximate but server to illustrate the point. You're at the stage where you should be worried less about spreading risk around various risky areas, and more concerned about having enough in safe areas that you're comfortable sleeping at night.