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Author: kevmarks Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 19414  
Subject: best spot for preserving equity and inflation Date: 2/6/2008 10:05 PM
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Hello,
My mom has just retired and wants peace of mind. This recent market is frightening her and she has moved all her money out of equities.

What is the best place to put money for preserving equity and getting adjustments for inflation.

Much appreciated.
Kevin
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Author: intercst Big funky green star, 20000 posts Top Favorite Fools Top Recommended Fools Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 12459 of 19414
Subject: Re: best spot for preserving equity and inflatio Date: 2/6/2008 10:45 PM
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kevmarks asks,

Hello,
My mom has just retired and wants peace of mind. This recent market is frightening her and she has moved all her money out of equities.

What is the best place to put money for preserving equity and getting adjustments for inflation.


Five-year TIPS, but you'll only get about a 0.80% real yield.

intercst

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Author: CycleGirl One star, 50 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 12493 of 19414
Subject: Re: best spot for preserving equity and inflatio Date: 2/7/2008 9:42 PM
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Well, everyone has their own comfort zone. I have a lot of single-A rated corporate bonds. They can yield in the 5.5% - 6.5% range. It does take some research and knowledge, however.

If her marginal tax rates are high, Municipal bonds are a good choice and very safe.

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Author: CycleGirl One star, 50 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 12494 of 19414
Subject: Re: best spot for preserving equity and inflatio Date: 2/7/2008 10:06 PM
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Hi Kevin,

It's me again... I thought of some more things that I could add. I didn't think that my first reply was helpful enough. I retired about 8 months ago and needed to create a retirement income stream for myself. Maybe your mom is in a similar situation.

First of all, there is a very good book entitled Getting Started in Bonds by Sharon Saltzgiver Wright. It was recommended on this board. You may want to get this and either read it or give it to your mom.

I mentioned that I invested a lot of money in single-A graded corporate bonds. What I did was to look over the historical default rates of bonds rated at various grades. Of course I wanted bonds with very low default rates and decided to stay in single-A and above.

I purchased bonds on the secondary market within my Fidelity IRA. That is, these bonds had been around for a while and were being sold by somebody else on the open market. I preferred companies that I was already familiar with, for example. Dow Chemical, Coca-Cola, Hershey, and Chase Manhattan.

These bonds pay coupons twice a year so that I'm getting a yield above 6%. I have a mix of longer term and shorter term bonds. The longer term bonds help with yields. The shorter term bonds help in case interest rates rise, you can purchase new bonds later on and capture those higher interest rates.

Well, I could go on all day about bonds, but this is a start.

CG

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