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Author: wrongnumber One star, 50 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 35400  
Subject: Diversifying Date: 1/3/2011 10:12 PM
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I began investing seriously in August 2008. I started with common stock investments because I understand them better than other securities. Luckily, I did not invest all my money in the first couple of months and have done pretty well with the stocks purchased from October through April of 2009.

Now I would like to put some money into fixed income investments, so I have been reading about fixed income investments and visiting this board regularly. As noted in many posts, this is a poor time to begin investing in bonds. Since I have a strong view that interest rates will be going up over the next few years and, consequently, I have been reluctant to invest in fixed income securities so far.

I saw a reference today to the Rydex Inverse Government Long Bond Styrategy Fund (RYJUX), which is designed to increase in value when interest rates go up. As I see it, even though this has "Fund" at the end of the title, it is a derivative instrument that bets on the increase in long-term interest rates (or shorts long-term bonds). As a derivative, I would consider an investment in this fund as a speculation. However, if I want to expand my portfolio into the fixed income arena, I should be able to shop for long-term bonds with reasonable interest rates (at a range of yet to be defined default risks I find acceptable) and hedge the interest rate risk with a comparable investment in RYJUX.

I would appreciate any feedback on this strategy. Also, if there are better vehicles out there for this kind of operation, I would appreciate hearing about them. I have not yet spent any time on due diligence on RYJUX or any specific bond issues that I would consider.
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