Securitized securities often carry another form of derivative risk, though it is hidden.
A mortgage borrower can usually prepay the mortgage, whether that's to refinance at a lower rate or because the borrower is selling the underlying property to move. That's a form of embedded option. One of the risks it creates is called, not surprisingly, prepayment risk. The risk of a high yielding bond being paid off early.
This embedded option also creates extension risk. Homeowners may be less inclined to pay off their mortgages if rates are going up and they've locked in a lower rate for years.
Investors typically look at duration - the first derivative, or slope, of the bond price vs. market interest rate curve. When looking at bonds with embedded options it can be important to look at the convexity or second derivative of that curve. Prepayment risk and extension risk affect the convexity to the detriment of the lender (bond holder).

M* Fund Category Definitions published 04/2025, available only in 09/2025 (don't know why M* does this every year!).
Changes, April 30, 2025
× Added Global Aggressive Allocation, Global Moderately Aggressive Allocation, Global Moderate Allocation, Global Moderately Conservative Allocation, Global Conservative Allocation, and Miscellaneous Allocation
× Retired Global Allocation and Leverage Net Long
× Revised text definitions of Aggressive Allocation, Moderately Aggressive Allocation, Moderate Allocation, Moderately Conservative Allocation, Conservative Allocation, Global Large-Stock Growth, Global Large-Stock Blend, Global Large-Stock Value, Global Small/Mid Stock
(Domestic allocation/hybrid funds have 75%+ in US securities, global allocation/hybrid funds have (only) 25%+ in foreign securities. This would make most TDFs global, but TDFs are classified separately & there is no mention of US vs foreign securities in TDF descriptions.
Global stock funds have 25-80% in foreign stocks.)
https://pdfhost.io/v/ZA2TxpMej3_MStar_Fund_Categories_042025
Note about PDF Host. M* Methodology/Research documents are now for download only (some years ago, they could be linked). M* Library isn't also easily searchable. But if you know the publication date, you can scroll through reverse-chrono order and locate the document. What I do is upload these documents to FREE PDF Host site and link them. Yesterday, some could open these documents, others could not. I also had problems uploading documents yesterday. So, hopefully, PDF Host works better for posters now.
https://www.morningstar.com/business/insights/research/methodology-documents

@WABAC
I never know what will work, and why I only own funds that are doing well currently.
Never in my life have I owned CLO, but I held this category for about 20 months.
In 2025 it was the first time that I held a big % in international bonds; not anymore.
Any bond fund that I have owned and went down 0.6-0.8%, I sold immediately.
I'm coming up now on about 15 years of investing in bonds, and I've always found funds that don't lose money, unless risk is so high and I'm out.

https://pdfhost.io/v/E..d~yHtX_MStar_MPRS_102024
Response received: The document is missing
If you own a home in an area that is at risk for 100 year floods, it is not safe simply because you haven't had a flood in the past couple of decades that you've owned your home. Likewise, risk to your home does not increase if you're flooded out and have to rebuild.
A quiescent period leads people to underestimate risk. (So intrinsically risky funds like SEMMX come to be regarded as cash alternatives.) Likewise, an isolated instance of bad luck can lead people to overestimate risk.
Risk as represented by M*'s risk score is long term risk. If you're concerned about worst case, pretty much any metric will underestimate that. A meteor might crash into your home tomorrow and do much more damage than a flood. The odds are ridiculously low, but the amount of damage a meteor would inflict is pretty close to worst case, if that's what keeps you up at night.
OTOH, long term conditions (as opposed to recent events) might gradually change. Weather is becoming more unstable and disruptive events are becoming more severe. This sort of change affects long term risk.

Excellent perspective above from @msf. I think we all tend to think in very short time frames and assume things will always be the same. A kind of deceptive ”time-warp” if you will. So I’ve tried to generate a list of key dates for thought. No doubt AI could have done it much better and faster..
Years Since …
Since our planet’s creation 4.5 billion years
Since the North American continent was created 200 million years
Since the mass extinction of the dinosaurs 66 million years
Since the Grand Canyon was created 6 million years
Since the first Homo sapiens walked the earth 300,000 years
Since Rome ruled the known world (Pax Romana) 2100 years
Since the signing of the Magna Carta 810 years
Since the Dutch Tulip bulb mania 389 years
Since The United States became a nation 249 years
Since the opening of a U.S. Stock Market 233 years
Since completion of the first transcontinental railroad 156 years
Since the advent of powered flight 123 years
Since the U.S, Federal Reserve was created 112 years
Since the first U.S. commercial radio broadcast 105 years
Since the beginning of The Great Depression 96 years
Since the end of WWII 80 years
Since Fidelity Investments was founded 79 years
Since John Templeton opened his first mutual fund 71 years
Since the first nationwide color TV broadcast 71 years
Since Hawaii became the 50th state 66 years
Since money market funds yielded over 15% 55 years
Since John Bogle founded Vanguard 51 years
Since introduction of the first mass marketed home computer (VIC 20) 45 years
Since Junk Bond King Michael Milken was indicted on corruption charges 37 years
Since CNBC began broadcasting 36 years
Since the first ETF was created 32 years
Since Dow first reached 10,000 26 years
Since the NYC Trade Center Attacks 24 years
Since the first IPhone was introduced 18 years
Since the end of The Great Recession 16 years
Since Donald Trump nominated Jerome Powell to be Federal Reserve Chair 8 years
Since the last Presidential Impeachment 4.5 years
Since the U.S. 10-year treasury bond last yielded under 2% 3 years
Food for thought. Apologies if this seems trite. Thanks to @equaizer for the correction

If you haven't done so already, you may want to read Prof. Snowball's
recent article titled "Thinking more broadly: Bonds beyond vanilla."
https://www.mutualfundobserver.com/2025/09/thinking-more-broadly-bonds-beyond-vanilla/

I own CBLDX. And I might end up with some of the other funds on that list. But I don't know how many of them will perform in a recession since they weren't around for the last one. But there are two. FEMDEX lost -27.6 in 2008 while OSTIX lost -5.5.
So I set up a query on MFO P using the same criteria as Snowball, minus the great owl designation, but adding a minimum age of 18 years so that I could include results from 2008 in the column display.
Nor did I restrict the the results except to exclude muni's and money markets. If the fund met the previous capture and correlation criteria I figured they must have been doing some thing right somewhere in the world.
I wasn't sure how long the funds had to return 4%, so I set it to five years since that was the minimum age he was looking for.
About half of the funds in the article were multi-sector. Only two made my cut. OSTIX lost 5.5. ENIAX lost 28.1.
The only flexible income fund to make the cut was NPSRX, which lost 24.4.
There were six global high-yield funds that made the cut that lost between 16.5 and 28.9.
And the only emerging market fund was the afore mentioned FEMDEX.
Well. We can certainly hope that the next recession won't be as bad as the last recession. And I won't try to predict when it will show up.
It seems to me that focusing entirely on the last five years doesn't account for the risk of recession. I sure hope we don't see rates climb the wall the way they have recently. But if the Fed goes Arthur Burns in 2026, who knows?
Since I have the results, here are the funds that did the best in 2008 along with their maximum draw down in the last five years:
OSTIX -5.5, -9.6
IOBZX -2.9, -8.2
LCCMX -2.5, -17.7
THOPX -2.1, -7.7
CMFIX -0.2, -4
RYSBX +7.2, -18.7
It's enough to have me contemplating ye olde mattress safety deposit.

WSJ provides a broader societal perspective - https://www.wsj.com/us-news/hyundai-raid-rattles-a-hot-spot-of-growth-in-georgia-d1fcd585?st=BMFs3C&reflink=article_email_share
Are these the ones that are “eating the dogs… eating the cats” ?

This is not the first time that the GOP has inked deals and boasted of success, only to be taken for a ride later. Foxconn in Wisconsin was not a whole lot different. None of the promised jobs for locals materialized. This is an example of he GOP's best work and portends how all of the ill-conceived deals revolving around tariff threats will turn out.
In five years, they will still be blaming Biden for MAGAs ineptitude. Without the slightest hint of credible causation. Just the usual complete lack of personal responsibility.

@yogibearbull mentioned MYGAs is a prior post.
MYGAs are functionally similar to CDs.
You could earn a 5+% yield with very little risk (assuming AM Best ratings are accurate).
2-year MYGA, insurance company rated "A" by AM Best, yields 5.15% ($70K or $100K min. premiums).
3-year MYGA, insurance company rated "A-" by AM Best, yields 5.45% ($100K min. premium).
5-year MYGA, two insurance companies rated "B++" by AM Best,
yield 5.80% and 5.81% respectively ($5K & $1K min. premiums).
https://www.annuityadvantage.com/annuity-rates-quotes/multi-year-guarantee-annuities/?years=3&sort=guarantee_period_yield&limit=20

Welcome to the September oh-so-totally back-to-school issue of the Mutual Fund Observer at https://www.mutualfundobserver.com/issue/september-2025/!
Highlights of this issue include:

• Lynn Bolin examines low-correlation alternatives in "BlackRock Systematic Multi-Strategy (BAMBX) versus BlackRock Tactical Opportunities (PCBAX)," seeking funds that can provide steady 5% returns with minimal correlation to traditional stocks and bonds.


• His companion piece, "Preparing for an Inflection Point on Interest Rates," responds to recent economic signals, including revised employment data, rising producer prices, and Fed Chair Powell's Jackson Hole remarks about potential rate cuts. Lynn anticipates sustained financial volatility with higher real interest rates and more frequent debt crises, and walks through portfolio protection.


• I share a Launch Alert for Franklin Multisector Income Fund, which debuted in the last week of August. The fund resonates with Lynn’s concern about finding investments that are insulated from the probable instability ahead, while at the same time offering the prospect of decent returns while we wait. The literature surrounding it got me thinking about the prudence of looking at income funds that were (a) successful and (b) determinedly isolated from the wobbles of the US market, which led us to …


• “Thinking more broadly: Bonds beyond vanilla,” in which we launch a systematic search for income-oriented funds that are insulated from the local lunacy. A screen for funds that could invest flexibly, have made 4% or more over the past five years, are uncorrelated with the US bond market, and qualify as MFO Great Owls (a sign of top 20% risk-adjusted returns across a range of examination periods). Sixteen such funds are available to regular investors, a combination of funds that we’ve written a lot about and ones that we’d never heard of.


• And The Shadow, as ever, tracks down a horde (perhaps a hoard) of industry developments, including a huge number of OEF-to-ETF conversions, two interesting reopenings, and the ongoing flight from funds grappling with climate change. (Pity.)

And what low risk are we talking about? Interest rate risk? Sorta a function of duration. Or default risk? Sorta a function of quality of the bonds and the broader business climate. If one defined low risk as short duration and high quality that would lead to a short term treasury and or high investment grade fund no? I see suggestions of funds with higher yields and generally higher yields come with higher risk.

Yes, gotcha. So far, to me, and given where we are, it's still worth it to reach into Junk for higher yield. I've now heard from SEVERAL of the "expert" talking heads that bond defaults remain low, about 3%. I'm using MMkt to save for a dedicated goal coming up. That money is out of the Market, still earning a virtually risk-free 4+ percent.
I stand by my recommendation, WCPNX. It's not as utterly tame as some, but I found that it served as extra ballast that I don't need. Duration is 5.48 years. And as a core-plus fund, it is reaching, just a tad, in order to offer you and me a BIT more profit. Is 5.48 years not "the belly" of the curve? (Again: I'm already out of it.)

junkster: "Weren’t you a victim of the SEMMX scam that it was a cash substitute in 2020? I wouldn’t touch any fund associated with the fellow that has run LCTRX since 1997. Investigate its punk performance in 2015 and why. I would stick with the guy that runs HOSIX who at one time worked at Leader. He has done an admirable job at the helm of Holbrook."
No I was not a "victim" of the SEMMX scam. I did own SEMMX for several years, but fortunately I was successful of trading out of SEMMX at the very early stages of its decline in 2020, and did not experience any significant losses from SEMMX or any of the other bond oefs I owned at that period. I have not been back into bond oefs since that period. As I have stated several times over the years, retirement investing objectives is to achieve a total return of 4 to 6%, with the least amount of risk. Since I was able to do that with CDs and MMs for several years after 2020, I found no need to invest bond oefs. Now it is becoming very difficult to buy a CD that makes 4%, so I am looking at the least risky way of making at least 4%

FD mentioned a fund above for consideration--LCTRX. It is categorized as an Intermediate Core Plus bond oef, but it is very different than other funds in this bond oef category, in that it has a very low duration and very low standard deviation. This fund uses CLOs (Collaterized Loan Obligations) defined in Investopedia in the following way:
"Collateralized loan obligations (CLOs) are structured securities that bundle a pool of lower-rated corporate loans and sell them to investors in tranches. These investments, managed by CLO managers, offer an opportunity for investors to gain exposure to higher-than-average returns by assuming default risk."
I am curious if any other posters have opinions about LCTRX and the use of CLOs.

Weren’t you a victim of the SEMMX scam that it was a cash substitute in 2020? I wouldn’t touch any fund associated with the fellow that has run LCTRX since 1997. Investigate its punk performance in 2015 and why. I would stick with the guy that runs HOSIX who at one time worked at Leader. He has done an admirable job at the helm of Holbrook.
Also I would like to retract a comment I made a while back about not touching HOBIX with a 10 ft pole. Not that I am recommending it for the purpose of this thread. Also as you alluded to, as the Fed fund rates declines so will the yields on a lot of funds mentioned in this thread. With your adversity to risk would just stick with money markets, CDs and Treasuries. I mean you already missed some big bull markets in many bond sectors over the course of the past several years. As for CLOs, they have been widely discussed here for some time now. Check the archives.
Surprised no one has mentioned a fund widely held by the populace here NRDCX. Talk about low volatility with nary a down day.

I have been tracking AAII Sentiment for a very long time - elsewhere before here. But that's only 1 indicator of many, & in recent years, it has been sending negative signals while some other indicators were just the opposite.
Some also differentiate between sentiment & market indicators. I interpret the data more broadly as market sentiment or temperature.
So, I have been tweaking the data & contents of these postings. A big change happened on/after 8/20/25 when the title was changed & an additional Fear & Greed indicator was added. AAII Sentiment is still featured prominently & there is still 6-wks of recent data (AAII website has lifetime history).
I am open to further tweaking but there are additional considerations: (i) the indicator data should be accessible to me for free by Wednesday-PM or Thursday-AM, (ii) it not be survey based (as AAII Sentiment already is), but market data based.

@hank "Just stopped my “voluntary” tax withholding on SS benefits yesterday. But - gosh - the break appears to expire in ‘28 - So guess will have to remember to turn withholding back on in couple years. Setting up an online account with SS took a lot of patience - but finally got it to work.''
Can you explain how you can turn off tax withholding "totally". I could see reducing , but not total turn off. With that said I should ask what % are you withholding. I think I'm at 22%.
Last year I had to send in $1K & change to IRS. I was thinking this -$6K deduction would even me out so to speak.
If one is in the 22% tax rate, $6000 times 22% equals $1320 in tax savings.

Thanks @msf. Just stopped my “voluntary” tax withholding on SS benefits yesterday. But - gosh - the break appears to expire in ‘28 - So guess will have to remember to turn withholding back on in couple years. Setting up an online account with SS took a lot of patience - but finally got it to work..

Fidelity has a free fund screener.
I looked for all bond fund (risk tab) + sorted by Sharpe ratio(risk/reward) + SD<2.
See this (<a href="https://fundresearch.fidelity.com/fund-screener/results/table/risk/sharpeRatio3Yr/desc/1?assetClass=TBND&amp;category=BL,CI,CL,CS,EB,GI,GL,GS,HY,IB,IP,MU,NT,PI,RR,TP,TW,UB,WH,XF,XP&amp;order=assetClass,category,standardDeviation&amp;standardDeviation=LS,2">link)
Then I switch to the overview tab, see (link).
To see 1,3,5 year performance.
The best funds for 3 years are
HOSIX leads the pack by a wide margin with Sharpe>3 and SD=1.28 and 3 years average of 9.1%. $49.95 fee at Schwab
LCTRX is great too. NTF at Schwab
CBLDX, SEMIX, SCFZX, DHEAX
The best for one year
HOSIX+DHEAX
For YTD
DHEAX, CBLDX, HOSIX

Not with this guy and the evil he inflicts. I’ll gladly and publicly acknowledge that I strongly wish for his death sooner than later. Where are you with abducting people on the street and no due process and flown to foreign concentration camps? Where are you with illegal redistricting? Illegal tariffs? And all of the other crucially important illegal actions?
You seem a reasonable guy sometimes, so you must know that the courts rule against him regularly, almost every other day in fact.

So typical, immature, dangerous, and can't accept the election results.
Get used to this 3+ years to do.

You didn’t answer any of the questions about due process and all that good stuff

DT:I am now considering adding some very low risk bond oefs

No fund achieved lower loss than 1.5% in 2020 + 2022 + performance over 4% since
1/1/2020.
Even RPHIX lost more than 3% in Q1/2020.
Since 2023, I no longer hold more volatile funds for months. Only short term for 1-2 weeks trades. Think ICMUX,PIMIX,RCTIX.
I have been holding funds with low SD with good performance.
Of course, I add timing and always near the exit.
Since early 2023 bond OEFS had one of the best performances for 2 years; several had very low SD and made 20% in 2 years. Think HOSIX, CLOZ which I held for many months.
ICMUX made more than HOSIX in these 2 years by 1%, but I preferred HOSIX.
chart (https://schrts.co/pMytFkvN)
2025 proved again that volatility can show up any time. The only way was to be out.
Since mid-April bond OEFs did great.
Bottom line: there are no funds with very low SD (under 1-1.5% loss any time) with good LT results that you can hold for years.
But, bond OEFs should perform well in the next 1-1.5 years.
So, looking at the last 3 years...
HOSIX would be a good choice with dist close to 6%. The manager, whom I spoke with, is about low SD.
SEMIX/SEMRX and DHEAX are also good and similar. SEMIX has lower SD per the chart.
Chart (https://schrts.co/CuANzpzj)
BUBIX looks good, but I prefer funds that can make 1-2, maybe 3% more annually.
Just YTD, the 3 funds I mentioned lost about 0.5%, but are 1-2% ahead of BUBIX.
Someone who is very risk averse and holds mostly bonds, would love to make another 2% more annually.
Disclaimer: currently, I don't own any of the funds above.

I'm not a big fan of ETFs, feeling that they have as many downsides as upsides. Still, trading high volume ultrashort ETFs seems to be much easier than trading most ETFs. Narrow spreads (a point or two) and good intraday price stability. So even market orders can get you fair prices. Just in case that is a concern of yours (it is for me).
A reason one might want to consider ETFs is that they open up a wider range of fund types. IG floating rate funds like FLOT and FLRN. (OEF floating rate funds are typically below IG.) AAA CLOs (I'm still on the fence with these and want to see how they react if/when the Fed drops rates) like PAAA.
Still thinking about what could replace CDs, you might also consider fixed annuities. They yield more than CDs. So they're reasonable substitutes in IRAs even though you don't get "extra" tax sheltering with them.
As yogi posted, TIAA's IRA annuity is currently yielding 4.0% and is liquid.
If you're looking to lock in rates for a few years, fixed rate annuities can get you rates north of 4% for 3+ years. See, e.g. Fidelity's rates. Fidelity sticks with sold rated issuers. You can get better rates by looking at less sound issuers, but that's taking on more risk.
Here are Schwab's rates. The first set of offerings, from Midland National, are somewhat higher. But Midland National is rated only A+ by all the ratings agencies, vs AA range or better for the other insurers.
The major downside of these fixed annuities is that you're locking in the investment for a period of years (3+ with Fidelity's offerings). Onerous penalties to get out early.

Here are a few other "low risk" bond oefs that I have retained on my M* Watchlists. You should remember that the M* risk numbers, noted by msf, are relative to the category the fund is in:
DBLSX, short term bond, Risk Score 5
BSBIX, short term bond, Risk Score 6
LALDX short term bond, Risk Score 9
FPFIX, nontraditional, Risk Score 9
HOSIX, Multisector, Risk Score 10
RSIIX, High Yield, Risk Score 8
WDHYX, High Yield, Risk Score 12
Ultra Short Term Bond funds are in a very low risk category, but I wonder if their total returns will start decreasing and fall below my 4% TR threshold, much like fixed income categories like CDs, due to their high usage of treasuries and investment grade bonds. If you subscribe to the falling interest rate scenarios, then maybe junkier bond oefs will benefit due to their higher correlation to equities. The M* risk numbers largely shadow Standard Deviation scores over past 3 years, but some of the riskier categories have some standout funds that handled risk much better than others.

Yep, I am very familiar with DHEAX, having owned it for years. I am also very familiar with SEMMX, also having owned it in the past, but dumped it after its terrible performance in the 2020 crash. I have not looked at it since Medalist took it over

Just to be clear, I'm not suggesting SEMMX/SEMPX, but the other, investment grade fund for the reasons I mentioned.