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Author: JimCT Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 35400  
Subject: Re: short term savings strategy Date: 4/13/2008 8:42 PM
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Thanks for the replies. I don't have any real reason to get a higher return... I don't live large, but I guess I'm more fascinated with the process of investing than trying to build some outrageous sum of money. To put it another way, some people like sports... but I've never been a big sports fan, but I've always been interested in investing... it's my entertainment of sorts... as corny as that probably sounds.

My original thought was to put that money into an S&P 500 index fund that is no load, no transaction fee, low minimum investment. After screening mutual funds at Scottrade, one fit the bill- ACIVX. Once that amount builds up high enough, I'd try my hand at stock picking (when time permits, but otherwise use no load, no transaction fee funds).

But with the recent volatility, and hunch that there are miles to go to the downside before the next bull run begins, I thought that bonds might yield something more than the 3% or so I could get in a MMDA. But I'm learning about bond funds (and bonds themselves). I don't want to put money into something I don't understand.

As I understand it, bonds are IOUs, debts basically, that are taken out by the government (treasuries) or companies (corporate bonds), among others. The maturity and coupon (interest) vary, but are set when bought, unless the bond is "callable" where the debtor can pay off the debt early for a lower rate of return for the bond holder. Bond funds are basically a fund of bonds of various types (based on the investment strategy) that have different levels of risk associated with them. But most importantly, there is no guarantee that the NAV will remain the same... it will move up or down based on the movement of interest rates (NAV up when rates go down, NAV down when rates move up I think?!?). One thing I do know for sure... bonds are much more complex than stocks!!
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