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Author: Lokicious Big gold star, 5000 posts Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 35342  
Subject: Re: Japan to end interference Date: 4/3/2004 2:18 PM
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"Any other ideas for temporary abode for the money to be ultimately ,put into SAFE, Long-Term investments, yielding 5+ percent instruments?"

Sorry, but my answer would be: not bloody likely.

Think of it this way: you just cashed in bonds that had good yields for a capital gain (I presume). When a bond fund does this, they are locking in gains that essentially substitute for the higher yields they were getting. If they then reinvest in lower yielding bonds with lower interest rate risk, the total return is still going to be greater (if interest rates go up) than if they had sat pat. This is what you just did.

In this low rate environment, you simply are not going to find "safe" yields of 5%, unless you go with some very long corporates (and hw safe are those really?). Your best bet is to ladder, either CDs, treasuries, TIPs or a combination. If you can figure out a ladder with an average of 5 year maturities (you'd need treasuries or TIPs) you can probably get about 3.5%; a little less with a 6 months to 5 year CD ladder. Then roll over to longer maturities as the short maturities come due. If rates go up, you'll catch that any maybe get your 5% over time. But there's nothing safe with 5% now. If you find anything, plase, please, let me know, but believe me, I've looked high and low and have been settling for 4% 5-year CDs as the least of the evils.
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