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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 35345  
Subject: Re: "No Default Risk" part of Fixed-In Date: 4/29/2009 10:45 AM
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What do you mean my "No Default Risk" part of your portfolio?

All mutual funds are exposed to capital loss. The NAV at your purchase price is not protected. It may not "default" but you have not protected your capital from losses.

CDs have real default protection being and insured instrument.

Individual Treasuries, which can easily be bought through Treasury Direct, are backed by the same money source as federally insured assets. Individual Treasuries are easy.

If you are going to use funds as part of your fixed income strategy than you need to make sure you are getting paid for the risks you are taking on. Most Treasury funds are priced like the underlying Treasuries they hold where is the risk premium that you should get paid for exposing your money to potential losses in NAV? There may be a way to get paid but it involves smart timing so you are doing smart "growth" buying. It is tough to "value" buy most of these funds. This isn't simple or easy to do.

I don't begrudge anyone using the tools available. I do worry that people are accidentally using the wrong tool for the job.

The best tutor on this board for managing default risk is Loki. If want to have a no default risk portion of your portfolio I would suggest rattling his cage.

jack
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