Pinoy Entrep

Last year was not a good year for most investments except for US Treasury Bonds. For retirement-oriented investors, the question remains as to what to do next. Many people wonder where decent rates of return can be found with minimal risk.

Many investors are wondering if Treasuries will be the best choice for 2009. Not likely, according to Pimco Chief Investment Officer Mohamed El-Erian, who advises against owning those types of bonds since they have become too expensive. Andrew Bary punctuated that same sentiment in a Barron’s article, (January 5, 2009: http://online.barrons.com/article/ ) entitled, Get Out Now.

If Treasury products are no longer optimal, what other choices are appealing for the weary investor in 2009? Many advisors and experts are now pointing to four classes of assets that deserve your attention. This article focuses on the first three; the fourth one is discussed on a separate link listed below.

* Securities backed by Mortgages * TIPS: Treasury Inflation-Protected Securities * Municipal Bonds * Investment-Grade Corporate Bonds: refer to the AboutETFs.info article at http://www.aboutetfs.info/Monthly-Income-Strategies.php

1. Yields on mortgage-backed securities have been declining ever since the Federal government November 2008 announcement that it would purchase up to $500 billion of Ginnie Mae, Freddie Mac and Fannie Mae home mortgage-related bonds. But with the purchases just beginning in January, current yields of this battered asset class still look attractive relative to historical levels. Also, with the Fed’s intervention, mortgage-backed securities now offer effectively the same Federal guarantee as U.S. Treasuries, but with higher yields. Consider iShares Barclays MBS Bond Fund (MBB), iShares Barclays Agency Bond Fund (AGZ) and SPDR Barclays Capital Mortgage Backed Bond ETF (MBG).

2. Treasury Inflation Protected Securities, or TIPS, may react to fears of inflation that have recently shifted to forecasts of worldwide deflation. This reversal in sentiment has sent TIPS prices plummeting and has driven yields higher. There is the strong possibility during the next several years that burgeoning Federal stimulus programs will lead inflation higher. TIPS will thrive as inflation heats up. With other expert forecasts published about TIPS, take a careful look at iShares Barclays TIPS Bond Fund (TIP). Also, consider SPDR Barclays Capital TIPS (IPE).

3. Municipal Bond tax-free yields have reached historically high levels as Municipal bond prices plummeted in November 2008. Although prices have recovered and yields have waned since the bottom, municipals still offer remarkable value compared to U.S. Treasuries. With today’s 4-5% tax free distribution rates, investment-grade municipals look like a bargain (a 5% tax-free yield for a taxpayer in the 35% Federal tax bracket is the taxable equivalent yield of a Treasury bond paying 7.4%). Municipal Bond ETFs worth considering include PowerShares Insured National Municipal Bond Portfolio (PZA), iShares S&P National Municipal Bond Index Fund (MUB) and SPDR Lehman Municipal Bond ETF (TFI).

For state-oriented bond choices, California may significantly benefit from Federal stimulus spending geared to infrastructure. If so, the iShares S&P California Municipal Bond Fund (CMF) looks like a good bet. California is likely to be high atop the list of states receiving more Federal assistance due to its political clout and economic size.

If your overriding priority is safety, you should look into (PRB) US Market Vectors Pre-Refunded Municipal Index ETF. This ETF uniquely invests only in pre-refunded municipal bonds. These bonds are issued to pay off existing bonds with higher rates and have the equivalent of a full US government guarantee of interest and principal.

The fourth asset class we reviewed for safer retirement income is the investment grade corporate bond approach. At their current prices, corporate bonds are still a bargain. We are witnessing portfolio managers, insurers and brokers loading up on high grade corporate bonds because they believe that the government bailout programs may lead to fewer corporate defaults. For more details on the corporate bond funds strategies, read the www.AboutETFs.info article on 15 asset classes at this link: http://www.aboutetfs.info/Monthly-Income-Strategies.php .

In future articles, we may examine two additional income-producing asset classes: senior loans and preferred stocks. But for now, your best bets for principal safety and steady income seem to be mortgage-backed securities, Treasury inflation protected securities (TIPS), municipal bonds and high-grade corporate bonds.

Investors are reminded that our commentary does not guarantee results. Choices mentioned in this article do not imply specific investment advice for an individual and they may not suit your objectives. Alpine Strategies and its officers and staff are not soliciting the sale or purchase of any securities in this article. Our comments are based on opinions which may change at any time. You should perform due diligence and consultation with a professional prior to the sale or purchase of any investment security.