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Author: mj9444 Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 35362  
Subject: best bonds & fixed income investments Date: 11/4/1999 4:04 PM
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looking for the best bonds & fixed income investments.have been in stocks for years, now retired and have recieved a pay off from a investment. I guess I need to be diversified.Don`t like the returns I see verses stocks but need income flow. Any thoughts would be greatly appericated as of right now every thing is in stocks. thank you michael
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Author: GrayWulff Big red star, 1000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 254 of 35362
Subject: Re: best bonds & fixed income investments Date: 11/4/1999 4:17 PM
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michael,

Consider setting up a bond ladder. Three to five years worth of cash invested in bonds, everything else left in stocks. Meet your cash flow needs from stock dividends, bond cupons, and bond redemptions. Each year if the market is good, you replenish your oldest bond, if it's bad you wait for a year or two. You get the cash you need and protection from needing to sell stocks in a bear market.

If you need more advice on how a bond ladder works, take a look through the old posts on this board, or just ask.

cheers,
GW

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Author: mj9444 Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 256 of 35362
Subject: Re: best bonds & fixed income investments Date: 11/4/1999 5:08 PM
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Thanks GW.If you have the time tell me about a bond ladder I`am all ears. Thanks Michael

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Author: GrayWulff Big red star, 1000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 257 of 35362
Subject: Re: best bonds & fixed income investments Date: 11/4/1999 5:48 PM
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mj9444,

For a relatively detailed description look at the thread beginning with post #122, the ladder itself is in post #124. That particular example is of a ten year bond ladder. Notice, for a 4% burn rate on your portfolio with inflation adjustments every year, and a full 10 years worth of cash, you need less than 20% in bonds! The example is for a 10 year ladder, that's a bit much for most people; 5 years is generally quite adequate.

For a bit more on the philosophy of replenishing ladders, look at the thread starting with post #223.

Take a look at those threads, particularly post #124 then ask any questions you like.

Cheers,
GW




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Author: 4814R Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 274 of 35362
Subject: Re: best bonds & fixed income investments Date: 11/9/1999 12:08 PM
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See if this interests you. You can buy a "capital financial instrument", sells like a stock, pays interest like a bond. You can buy A rated by Moodys and S. I get 8.2 to 8.5 from this category of investment. Call fidelity bond dept. The maturity nay be long or short but I can sell the bonds any time during the period at market price. what I wanted was a good interest rate in a secure investment. They are referred to also as preferred stock,but the 8.5% return places it more like a bond. Among the companies that offer this are Reliastar, Farmers Insureance, Oklahoma Gas & electric, BancOne.



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Author: GrayWulff Big red star, 1000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 280 of 35362
Subject: Re: best bonds & fixed income investments Date: 11/9/1999 6:07 PM
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See if this interests you. You can buy a "capital financial instrument", sells like a stock, pays interest like a bond. You can buy A rated by Moodys and S. I get 8.2 to 8.5 from this category of investment. Call fidelity bond dept. The maturity nay be long or short but I can sell the bonds any time during the period at market price. what I wanted was a good interest rate in a secure investment. They are referred to also as preferred stock,but the 8.5% return places it more like a bond. Among the companies that offer this are Reliastar, Farmers Insureance, Oklahoma Gas & electric, BancOne.


4814R,

Do these investments have a fixed maturity date? The big problem with bond funds is that you can never be guaranteed of getting the face value. As a result you take considerable interest rate risk. If interest rates go up, the "market value" may be much less than the face value.

The whole point of a bond ladder is that you are guaranteed a fixed amount of cash at maturity. The focus is on the face value, not the cupon. If you were willing to take market risk, you would do better in stocks.

Cheers,
GW

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Author: 4814R Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 296 of 35362
Subject: Re: best bonds & fixed income investments Date: 11/13/1999 11:13 AM
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TO GW;

You are right there is a risk of getting all the principle back. However any discussion of bonds is complicated. Ladders are also motivated by the investor requirement to get at his capital for living needs in the short term. I don't have that requirement. I do have a requirement for a guarantee of a nice return for the next few years. This satisfies that need. As for return of principal I have the capacity to wait. You say "if you have the capacity to handle risk stocks would be better". I've had 7 figures in stocks for several years with nice gains. If the market averages at long term of about 12% are to return, then there must be some negatives in the future or break even. Niether of these outcomes would feed my family (retired). the capital instruments I have will do so. I 'm still 60% in equities also so

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