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Subject:  Re: How to diversify into bonds Date:  1/8/2014  9:28 PM
Author:  pauleckler Number:  35159 of 36990

Because interest rates are at historic lows and are likely to rise from here as the economy recovers (ie the result expected if the Federal Reserve Board ends quantitative easing as being discussed in the news), now is a terrible time to buy bonds.

1. Wait if you can for at least a year until rates are up a bit.

2. Consider buying stocks that pay dividends instead. They are still equities but the dividend yield provides some downside protection.

3. If you must, buy the bonds themselves rather than bond funds. When held to maturity, they will return full face value. You may see some paper losses, but they do not matter as long as you hold to maturity. But note minimum is $5K to make bonds saleable if you need the money. (Bond funds will decrease in value as interest rates rise.)

Under the circumstances I would be in no hurry to sell assets to buy bonds. So better to accumulate a bond position by buying them (dividend stocks or bonds themselves) with new contributions.
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