Comments on: Making the Case of Having Alternative Investments in Portfolio http://www.thesunsfinancialdiary.com/investing/making-the-case-of-having-alternative-investments-in-portfolio/ Fri, 03 Feb 2012 17:42:24 +0000 hourly 1 http://wordpress.org/?v=3.3.1 By: kittyhttp://www.thesunsfinancialdiary.com/investing/making-the-case-of-having-alternative-investments-in-portfolio/#comment-46985 kitty Mon, 17 Nov 2008 17:32:44 +0000 http://www.thesunsfinancialdiary.com/investing/mutual-fund/making-the-case-of-having-alternative-investments-in-portfolio/#comment-46985 I did put a little of my 401K into a commodity fund recently. Also a little in investment grade bond fund since bonds appear to be a good deal now with the credit crisis driving yields up and values low. I also bought 10K worth of municipal bonds (not funds, actual bonds- 5K of AA NYC bond with tax free yield to maturity of 5.3% and 5K of AAA NYC tax receivable bond with yield-to-maturity of 5.36%). The reason I got a better deal on a AAA bond is that I bought it a couple of weeks earlier when the credit crisis was worse. I plan to buy more bonds this week - undecided about municipal or corporate - when one of my CDs matures.A word of caution about bond funds. Don't confuse them with individual bonds. Individual bonds are fixed income investments: they come with a fixed coupon rate and a "promise" to return to you your principal at maturity. While the value of individual bonds on the secondary market goes up and down (except for government I and EE bonds, but these are a different story), you always have an option of waiting till maturity when you'll get your money back unless bond issuers defaults. Bond funds, on the other hand, are NOT fixed income investments. Bond funds include many bonds, each with different maturity date. When you get your money back from the bond fund you essentially sell your bonds at whatever the current market price is on the secondary market. So you may lose money not only when there are defaults, but also when all bond values are down. Bonds tend to lose value a lot when the interest rates go up. While bond funds may offset this with the ability to invest in new bonds that offer higher returns as older bonds mature, it may take longer to recoup the money.Some people mistakenly think that the case of individual bonds vs bond funds is the same as individual stocks vs mutual funds. In fact, the bonds case is a bit more complex. In some respect bond funds may be riskier than individual bonds, especially if you keep to high quality bonds. There are pros and cons in both bond funds and individual bonds, but former being less riskier than the latter is not one of them. I did put a little of my 401K into a commodity fund recently. Also a little in investment grade bond fund since bonds appear to be a good deal now with the credit crisis driving yields up and values low. I also bought 10K worth of municipal bonds (not funds, actual bonds- 5K of AA NYC bond with tax free yield to maturity of 5.3% and 5K of AAA NYC tax receivable bond with yield-to-maturity of 5.36%). The reason I got a better deal on a AAA bond is that I bought it a couple of weeks earlier when the credit crisis was worse. I plan to buy more bonds this week – undecided about municipal or corporate – when one of my CDs matures.

A word of caution about bond funds. Don’t confuse them with individual bonds. Individual bonds are fixed income investments: they come with a fixed coupon rate and a “promise” to return to you your principal at maturity. While the value of individual bonds on the secondary market goes up and down (except for government I and EE bonds, but these are a different story), you always have an option of waiting till maturity when you’ll get your money back unless bond issuers defaults. Bond funds, on the other hand, are NOT fixed income investments. Bond funds include many bonds, each with different maturity date. When you get your money back from the bond fund you essentially sell your bonds at whatever the current market price is on the secondary market. So you may lose money not only when there are defaults, but also when all bond values are down. Bonds tend to lose value a lot when the interest rates go up. While bond funds may offset this with the ability to invest in new bonds that offer higher returns as older bonds mature, it may take longer to recoup the money.

Some people mistakenly think that the case of individual bonds vs bond funds is the same as individual stocks vs mutual funds. In fact, the bonds case is a bit more complex. In some respect bond funds may be riskier than individual bonds, especially if you keep to high quality bonds. There are pros and cons in both bond funds and individual bonds, but former being less riskier than the latter is not one of them.

]]> By: Moneymonkhttp://www.thesunsfinancialdiary.com/investing/making-the-case-of-having-alternative-investments-in-portfolio/#comment-46634 Moneymonk Wed, 12 Nov 2008 23:25:18 +0000 http://www.thesunsfinancialdiary.com/investing/mutual-fund/making-the-case-of-having-alternative-investments-in-portfolio/#comment-46634 Some of those funds are reopening to new investorshttp://www.moneymonk.net/2008/11/vanguard-oakmark-reopen-attractive.html Some of those funds are reopening to new investors

http://www.moneymonk.net/2008/11/vanguard-oakmark-reopen-attractive.html

]]> By: Financehttp://www.thesunsfinancialdiary.com/investing/making-the-case-of-having-alternative-investments-in-portfolio/#comment-46495 Finance Mon, 10 Nov 2008 11:56:56 +0000 http://www.thesunsfinancialdiary.com/investing/mutual-fund/making-the-case-of-having-alternative-investments-in-portfolio/#comment-46495 Yes, invest in a portfolio of financial securities can diversify or reduce the overall risks, one can consider investing in different types of products like bonds, etc. Yes, invest in a portfolio of financial securities can diversify or reduce the overall risks, one can consider investing in different types of products like bonds, etc.

]]> By: Timhttp://www.thesunsfinancialdiary.com/investing/making-the-case-of-having-alternative-investments-in-portfolio/#comment-46361 Tim Fri, 07 Nov 2008 23:36:11 +0000 http://www.thesunsfinancialdiary.com/investing/mutual-fund/making-the-case-of-having-alternative-investments-in-portfolio/#comment-46361 I guess the question is what is the difference between buying an array of sector funds versus a balanced fund? precious metals are problematic to me, because they have been flat forever except the unjustified spike within the past 1.5 years. I guess the question is what is the difference between buying an array of sector funds versus a balanced fund? precious metals are problematic to me, because they have been flat forever except the unjustified spike within the past 1.5 years.

]]> By: Donny Gamblehttp://www.thesunsfinancialdiary.com/investing/making-the-case-of-having-alternative-investments-in-portfolio/#comment-46310 Donny Gamble Thu, 06 Nov 2008 19:08:23 +0000 http://www.thesunsfinancialdiary.com/investing/mutual-fund/making-the-case-of-having-alternative-investments-in-portfolio/#comment-46310 A great idea that more and more people need to start thinking about having is a self directed IRA. This let's you diversify your investment portfolio into one single location. A great idea that more and more people need to start thinking about having is a self directed IRA. This let’s you diversify your investment portfolio into one single location.

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