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Greetings...

I have been searching the net for a site that can give me some basic information/advice on investing in Treasuries...with little luck. Does anyone have a site or two that they can recommend? Or maybe some good advice?

I have put the cart before the horse...again...and allocated 15% of my portforlio to an ETF newly offered by iShares (IEF). It is a Lehman 7-10 Year Treasury Bond Fund.

After figuring this to be a smart, diversifying move, I began to think that this is probably a pretty lousy time to start to invest in bonds & treasuries as they are at their peak because of the very low prime interest rate. This rate, in my opinion, should start it's way back up in the next year or so and my investment would wear away along with it.

So...is this still a smart thing to do...now...or should I wait to include fixed income investments until later? Any crystal balls out there?

TIA,

Bill
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Excellent question i've been wondering that myself. I have %100 in stocks right now and think i'm going to wait to consider bonds and REIT's when the environment is more friendly to those investments,but i would like the opinions of others.


2828
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imho, treasuries offer no value presently.....one can get a better yield, triple tax free in state munis of the same duration.
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Greetings 2828...

I have %100 in stocks right now and think i'm going to wait to consider bonds and REIT's when the environment is more friendly to those investments...

Everyone has their own personal investment goals and financial situations...so, everyone's asset allocation may well vary considerably. I have a pension that provides for my basic needs and my portfolio reflects that to some degree.

I've decided that I don't have what it takes (Mainly a strong stomach) to pick out individual stocks and hope that they don't fall on their arses. I also don't have any "earned income" for purposes of utilizing a Roth IRA, so everything I invest is fully taxable. (That's what I get for being a late bloomer and a financial idiot all my productive life). Anyway, I have decided that "Exchange Traded Funds" (ETFs) are the way to go...for me. I've allocated my port as follows:

1) Vanguards Total Stock Market Index Fund (VTI) - 60%

2) iShares Dow Jones Real Estate Index (IYR) - 20%

3) iShares Intermediate Treasury Bond Fund 7-10YR (IEF) - 15%

4) Individual companies/investments/ETFs (for fun) - 5%

Number 3) is the only allocation that I haven't invested in as yet. After making my decision on this I suddenly got cold feet when it came to treasuries/bonds in general because of their inverse reaction to the Prime Interest Rate. I need to study this some more, I think.

As far as REITs go...I think that they will be the sweethearts of my portfolio. I think they make a nice offset to equities. I believe they are much more inflation resistant then other income producing investments. However, I still want to add that treasury/bond allocation too...eventually...I think. It will nicely round out my "Couch-Potato" Port! If not, I'll add more REITs.

Anyway, that's what I'm up to.

Best regards,

Bill
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is this still a smart thing to do...now...or should I wait to include fixed income investments until later? Any crystal balls out there?

No crystal balls, but some basic facts:

- Up until the 50's, interest rates were never as high as they were today. Anyone living in the 1800's through 1940's might have been skeptical that one might earn even 6% in intermediate risk-free bonds; they probably would have laughed at you if you suggested double-digit yields. History is on the side of low interest rates.

- Without inflation, there will be little pressure for rates to rise. If the economy continues to stagnate, and more people find themselves jobless, consumer spending will continue to decline, and inflation should not be able to take hold.

- The role of diversification is to protect you from being wrong, by forcing you to invest in a manner which you do not agree with. Even if you perceive a peak in the bond market, it's important to still maintain some degree of bond holdings, in case your perception does not turn out to become reality. Betting everything on an one-year economic turnaround is not diversification.

- Whether or not a 15% bond allocation, or the use of the iShares intermediate Treasury ETF is appropriate, depends entirely on your own financial profile. Perhaps a mix of the intermediate and short ETFs might have been a better choice, in terms of managing the risk of rising interest rates.

- If you have the option to do so, buying individual Treasuries (or perhaps CDs, as these sometimes offer better rates) is usually preferable to Treasury funds: there are no fund management expenses, the markets are very liquid, with few risks for the beginning investor, and one can choose to hold to maturity, ensuring at least there will be no loss.
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Bill,

Your allocation looks pretty good to me,but i don't know much about treasuries. How are those Ishare dow REIT index shares treating you. I've never heard of them,but they've tickled my curiousity.


2828
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2828...

The following site has very specific information on the REIT that I am investing in (IYR):

http://www.ishares.com/fund_info/detail.jhtml;jsessionid=K4V5RFXD5Q3FKCQGMTMBBGQKAEHQGD50?symbol=IYR

They have another, less broad-based (fewer holdings), REIT that you can look at as well. I like the indexes for REITs for the same reason I like them for equities...strength-in-numbers! (IYR) tracks about 68 different REIT Companies where as the other tracks about 30.

The "Fool" has information on ETFs, if you are interested. Another good site is www.indexfunds.com for general indexing and ETF information.

I utilize www.sharebuilder.com for most of my purchases, including (IYR). One of the no-nos of investing in ETFs is not to drip every month or so because you significantly increase your costs due to commissions. (Sharebuilder fees are $4.00 per purchase). I know this is against all investment sense/logic, however, I go against it every month. I'm the kind of person that has to invest at the beginning of every month or else I would find some other good,/i>way to "use" my money.

My REIT Graph looks somewhat like a rollercoaster, but it has done better than my stocks. I like the idea that there is very little correlation with stocks.

Regards,

Bill
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foobar 73...

- The role of diversification is to protect you from being wrong, by forcing you to invest in a manner which you do not agree with. Even if you perceive a peak in the bond market, it's important to still maintain some degree of bond holdings, in case your perception does not turn out to become reality. Betting everything on an one-year economic turnaround is not diversification.

Very good advice! Well put! You have helped bring back the perspective that caused me to look at fixed-income investments in the first place. It will still be hard to allocate hard-earned funds to an investment you feel will have problems in the not-to-distant future. Who knows though, maybe things will remain realitively constant for much longer then I think. For everyone's good, I hope not though.

I'm still going to do more research before jumping into this one. My main problem is that my window of time is closing in on me much faster then I would like, so it kinda forces me to act before maybe I feel comfortable. (I turned 60 in June). All of my investments will go to my wife to offset the drop in pension she will experience once I make the transition to "the other side of the dirt". (Down to 55%).

Anyway, thanks for your words of wisdom and best regards,

Bill

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Greetings again. This has been a busy day...

No one seems to have any particular sites they would like to share with the board that would educate us all in fixed-income investments. I managed, today, to stumble across one that is pretty good. It has a lot of material on both bonds and treasuries:

http://www.investinginbonds.com/

Just look in the left-hand column and click on what interests you.

(I think that this board should have a "Q&A" like the other boards do).

Regards,

Bill
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Bill,
On the bonds and fixed income side we're all in the same boat. If you'll read post #4175 (kudos to Crosenfield) it explains perfectly the dilemma which we all are facing at the moment.
Regards,
td ( who is also 60 and is not yet ready for the "transition to the other side of dirt")
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Greetings tdbowz...


On the bonds and fixed income side we're all in the same boat. If you'll read post #4175 (kudos to Crosenfield) it explains perfectly the dilemma which we all are facing at the moment.

Thanks for the post referal. All a person can do is wait and watch for awhile.

Regards,

Bill
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Thanks so much Bill for that site. They have a lot of information and although I haven't read it yet, I'm printing it out and will read it at the gym (while I'm exercising my mind as well as body).

My general questions are - where do you buy bonds - do you have to go to a broker? I have some treasuries which I bought direct, I have a bond fund, but if I want to buy individual bonds or sell individual bonds what is the best way? What exactly is a "put" and GSE. What is better calleable or not, should they be insured. Those questions might be answered when I read the literature you recommended, but I already have some bonds with a broker (with whom I'm dissatisfied) so I need to change and also invest some new money. Is it possible to do it with a discount broker or doesnt it make sense? Thanks
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Greetings opentolearn...

I'm happy you found the site informative (or will at the gym). I'm only sorry that I can't provide you with the information you are looking for.

I came on this board looking for treasury bond fund info as I need a fixed income allocation for my portfolio. I only hope that you have better luck then I did. As I said in one of my earlier posts...I think that this board really needs a good "Q&A" like the other boards have. This makes it much easier to find the basic info a person needs that is board related. However, it would take someone with far more experience then me to accomplish that task. Any volunteers??

Good luck and best regards,

Bill
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