Retirement & Financial Planning Report

In past issues of the Retirement & Financial Planning Report, we mentioned how soothing and rewarding it can be to invest some of your money in the bond market during a wild ride in stocks. Here are a couple more categories of bonds to consider — and why:

  • Treasury bonds with maturities ranging from two to five years: Short-term Treasuries yield over 6%, providing the highest yields as well as the least interest-rate risks among Treasuries.

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  • Municipal bonds that mature in just over 10 years: Many individual investors won’t buy munis that mature in more than 10 years because they don’t want to take the risks of longer-term bonds. Therefore, there’s a lot more demand for 10-year bonds than for 11- to 15-year bonds. If you go out to the 11- to 15-year range in the muni market you’ll get more yield than you’d get with a 10-year bond, yet there’s not much more risk if you hold the bonds until maturity.

  • Closed-end municipal bond funds: These funds offer 6% tax-exempt yields without the risks of high-yield munis. They trade publicly, often at discount, which boosts the yield. Top-rated funds include MFS Municipal Income Fund and MSDW Municipal Income Opportunities Fund, both of which trade on the NYSE. Whenever you consider a closed-end fund, follow it for a while and buy it when it sells at a wide discount from the securities in its portfolio.