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My wife recently retired and received a lump sum along with her 401k. We want to protect 40% to 50% of the IRA money by investing in Bonds. I am a novice and recently realized that you can loose principal when investing in bond mutual funds. What are all my choices in investing in different levels of safty in interest bearing investment vehicles. My wife is not going to need this money for a least 2 years. Any help would be greatly appreciated.

Thanks,
AzHub
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First of all you don't necessarily protect your money by investing in bonds. What you protect is your yield based on interest.
As a matter of fact in a bond mutual fund you can loose principle. But if you invest in the following you will not loose principle if you hold to maturity.
Money Market Mutual fund
T-Bills,
Treasury notes.
I would not invest any lump sum money today in bonds. Interest rates are on the rise.
I would take the money and invest in one of the three above it you are worried about capital preservation and not growth.
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azhub wrote:
My wife recently retired and received a lump sum along with her 401k. We want to protect 40% to 50% of the IRA money by investing in Bonds. I am a novice and recently realized that you can loose principal when investing in bond mutual funds. What are all my choices in investing in different levels of safty in interest bearing investment vehicles. My wife is not going to need this money for a least 2 years. Any help would be greatly appreciated.

I'm planning to retire next year and have had the same question. A good start is to look at the "Bonds & Fixed Income Investments" board at http://boards.fool.com/Messages.asp?id=1030062000132000

Bob H, aka Blues
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First of all you don't necessarily protect your money by investing in bonds. What you protect is your yield based on interest.
As a matter of fact in a bond mutual fund you can loose principle. But if you invest in the following you will not loose principle if you hold to maturity.
Money Market Mutual fund
T-Bills,
Treasury notes.
I would not invest any lump sum money today in bonds. Interest rates are on the rise.


How do you know that interest rates are going to rise ? If you are so sure, why don't you purchase options on the interest rate futures and retire soon after they rise ? :-)

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