UnThreaded | Threaded | Whole Thread (6) | Ignore Thread Prev | Next
Author: jackcrow Big gold star, 5000 posts Feste Award Nominee! Old School Fool CAPS All Star Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 35387  
Subject: Re: "No Default Risk" part of Fixed-In Date: 4/29/2009 4:40 PM
Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Recommendations: 2
kh,

A couple of suggestions.

No default risk should be a working definition that = no default risk to you. A loss in NAV is in essence the same as default, either way you are out that capital.

A bond mutual fund behaves more like equity than bonds. Call it a hybrid if you don't want to go all the way. It will not buy you the diversity you are looking for. Something with real face value and a dependable interest stream does. As long as NAV is repriced every day you haven't minimized or diversified away "re-pricing risk" or market risk. All you did was move from Wal-Mart to Target.

If you don't want to take on corporate bonds that is fine, just don't expect a mutual fund to fill in that blank. It ceases being the asset class diversifier that you are looking for as soon as you use funds as a proxy.

If you want painfully simple. Pick a small handful of equity ETFs and then either shop CD's and build ladders or set up your Treasury Direct account to do much the same thing automatically. Doing this will capture the diversity I think your seeking. What is out of the mix is corporate bond exposure both the upside and the downside.

jack
Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Print the post  
UnThreaded | Threaded | Whole Thread (6) | Ignore Thread Prev | Next

Announcements

Pencils of Promise - Back to School Drive
"Pencils of Promise works with communities across the globe to build schools and create programs that provide education opportunities for children."
What was Your Dumbest Investment?
Share it with us -- and learn from others' stories of flubs.
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Community Home
Speak Your Mind, Start Your Blog, Rate Your Stocks

Community Team Fools - who are those TMF's?
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and "#1 Media Company to Work For" (BusinessInsider 2011)! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.
Advertisement