How to invest and get better returns without getting into the stock market:

Intrest rates cannot go any lower!

Interest rates are beginning to creep up from historic lows and will most likely continue to rise. CD rates are below 2 percent. Treasuries are not paying that well right now at all.

Long and intermediate term bond fund values will fall as interest rates rise. Long term bonds may be satisfactory for you if you hold them to maturity. Keep in mind that should interest rates hit 8 percent you will not be happy holding a 3.5 percent bond.

If you are willing to take more risk some of the following might be right be for you.

High yield bonds funds. These types of bond funds tend to do very well in an improving economy.

Regardless of the fact that

unemployment rates continue to remain high there are some signs of an improving economy. At the depths of the economic downturn high yield bond funds took a hit as always is the case. During times of improving economic conditions they tend to do very well.

Big money with bond funds.

I am a big fan of money!
I am a big fan of money!

Specific bond funds:

Some of the high yield bond fund recommendations are as follows:

Janus High Yield symbol JAHYX. In 2009 this fund was up almost 41 percent a very nice showing.

Artio Global High Income symbol BJBHX. In 2009 this fund was up over 52 percent!

The stark downside was that in 2008 Janus High Yield lost 19 percent and Artio Global High Income lost 24 percent. You must ask yourself are you willing to take that kind of risk.

A more conservative alternative can be

Short term bond funds: In a rising interest rate environment you want to keep your duration on your bonds as short as possible. My recommendations on these funds are as follows:

Janus Short-Term Bond fund symbol JASBX. This fund has never lost money in a given year. In 2009 this fund was up 8.56 percent. Better than a CD but with a little more risk.

PIMCO Low Duration bond symbol PLDDX. This fund has lost 1.58 percent in 2008 for its worst year. For 2009 this fund is up over 13 percent.

Some closed end funds get into international bonds and have been very effective in getting investors a nice return on their investment.

I like the following closed end mutual funds.

Aberdeen Asia-Pacific Income Fund symbol FAX. This fund was up in 2009 a very nice 56.28 percent. On the downside this fund was down almost 25 percent in 2008. Again you must accept this kind of down side risk if you wish to invest in this type of fund.

PIMCO Strategic Global Government Fund, Fund symbol RCS. In 2009 this fund was up over 31 percent. Like the Aberdeen Asia-Pacific Income Fund this fund was down in 2008, but only down less than 5 percent.

Closed end funds provide the most upside when trading at a larger than normal discount to net asset value (NAV).

For a little international flavor is the Loomis Sayles Global Bond symbol LSGLX. This global bond fund was up almost 21 percent in 2009 but down almost 10 percent in 2008.

There a few arbitrage funds, the Gabelli ABC fund, fund symbol GABCX. This fund lost 2.63 percent in 2008. In 2009 this fund was up just over 6 percent. This fund has produced returns of nearly 12 percent in its best year and has averaged nearly 7 percent since its inception in 1993.

Another fund to consider in this area is the Merger Fund symbol MERFX. This fund did lose a small percentage in 2008 (2.25%) and had a bad year in 2002 where it lost just over 5.5 percent. That aside this fund is up almost 8 percent per year over the last 20 years and was up over 8.5 percent in 2009.

Always keep a good balance in your asset allocation. Do not put all of your eggs in one basket. Your asset allocation should be adjusted for your risk tolerance.

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Comments 2 comments

scheng1 6 years ago

Index funds may be a better choice for conservative investors.

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Daddy Paul 6 years ago from Michigan Author

With many of these funds an investor can be much more conservative than an index fund.

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