I started working as a stockbroker in 1987 and just a few months into my career came the the October 19, 1987 meltdown (so-called, ‘Black Monday’). Each time we go through these down cycles, people vow never to go back into the stock market, look to pull out all of their money, and move to CD’s and the like. While I still think the long term best bet is to stay invested in the stock market, there are times when it makes sense to at least take some percentage of your money and move it to safer alternatives. For many, this will simply be a savings account, money market, or bank CD, for others that are more informed there are better options.
First, don’t forget that there are sectors of the stock market that are going up. While the market as whole is doing poorly, not every stock is in a downward trend. Energy, gold, health care, and insurance have all had very nice gains over the last three months. So, maybe the answer is not dumping stocks but simply rotating into more favorable industries. If you are convinced that you want to put your money on the sideline, you do have several alternatives.
A great alternative to stocks is bonds. Bonds are an especially good investment in times of falling interest rates. Bonds not only pay dividends, but also offer the potential of appreciation when rates fall. Take a look at the returns from the bond funds listed below:
| Symbol | Company | 3-month | YTD | 1-year | 3-year | 5-year |
|---|---|---|---|---|---|---|
| PEDIX | PIMCO Extended Duration Instl | 12.87 | 3.69 | 15.68 | NA | NA |
| PLRIX | PIMCO Long Duration Total Return Instl | 6.13 | 2.17 | 10.48 | NA | NA |
| VBLTX | Vanguard Long-Term Bond Index | 4.25 | 1.37 | 8.43 | 4.91 | 6.23 |
| CLDAX | Calvert Long Term Income | 4.18 | 1.28 | 9.66 | 6.75 | NA |
| IOBCX | ICON Bond C | 3.47 | 1.65 | 6.90 | 2.99 | 4.52 |
| SEAKX | Steward Select Bond Indv | 3.35 | 1.60 | 7.11 | 3.78 | NA |
| VWETX | Vanguard Long-Term Investment-Grade Adm | 2.25 | 0.93 | 4.87 | 3.87 | 5.82 |
| VWESX | Vanguard Long-Term Investment-Grade | 2.22 | 0.93 | 4.77 | 3.74 | 5.70 |
| GEDYX | GuideStone Funds Extended-Dur Bond GS2 | 2.20 | 0.08 | 8.67 | 6.02 | 7.79 |
| CLINX | Croft Income | 2.05 | 3.56 | 4.93 | 3.74 | 7.73 |
As you can readily see, bond investors have been doing quite well over the past year and even the most recent quarter. I would suggest the best answer right now would be a portfolio make-over with some exposure to bonds and also some of the sectors that are performing well despite the subprime real estate crisis. For some individual help on this, I would recommend my good friend Bob Yetman who can be reached through his e mail at jlpfs92@aol.com
Also, you will not likely find the best yielding money market at your local bank. Here is a link to a list of the nation’s highest yielding options:
Highest Paying Money Market Accounts
Agree or disagree, click on comments below.
My main website is www.ChristianMoney.com
James L. Paris
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