Fixed Income Choice for 2014

Gingersnap

Hi Everyone,
I'm trying to figure out the fixed income part of some cash that's been "under the mattress" for a while.Ideally it would generate some income or dividends not just capital appreciation. I'm open to mutual fund ideas, ETFs,municipal bonds, and maybe closed end funds, but the fees on CEF's seem hidden and complicated. So far my reading suggest:
shorten up on duration to avoid interest hike risk!
watch out for credit risk!
currency hedged international bonds
multi-sector bonds
municipal bonds
I'm open to any ideas that are lower risk, capital preservation based.
Thanks for your advice,
Gingersnap

bee

I like multisector bond funds where the management can identify opportunities. "Small and nimble" might be one more attribute I would like my fix income fund to have. A new fund from a solid bond company (USAA) is USFIX. M* snapshot 13% equities, 20% preferred stocks, 58% Corporate, and 5% Commericial MBS, 7% US Treasury, 3% bank notes. It only has $145M under management. YTD it's up almost 4%. Here it is charted against two other multisector bond funds (PONDX and LSBRX) since last October:

Manager Commentary:
https://www.usaa.com/inet/pages/mc_0082

Ted

@Gingersnap: Don't be afraid of junk bond funds. Try and dip your toe in the water.
Regards,
Ted

M* High Yield Fund Returns: http://news.morningstar.com/fund-category-returns/high-yield-bond/$FOCA$HY.aspx

cman

Yes, suggest you look at short term high yield funds (highlighted at this site for their mis-classified M* ratings) or high yield munis which are doing well with improving economy (HYD) as part of a diversified fixed income portfolio or go with a multi-sector fund as suggested above.

You cannot get any dividend worth the effort without risking capital loss though.

Charles

Long/short.
Market neutral.
Short-term high yield .

hank

It sounds like you have a pretty good grasp of the myriad of approaches out there in fixed income investing as well as the various assorted potential problems facing fixed income investors which (I'm sorry) no one can predict for certain. There's many fine offerings out there and many different avenues to take - as some have correctly offered. For a one-stop, conservative, kinda "one size fits all" income fund I like DODIX. Last time I checked the ER was around .40 which is quite low. FWIW

Charles

Yep, Hank is right. DODIX is a jewel.

davidrmoran

I agree junk (managed) is something you could consider (FAGIX, e.g.), and DODIX is only a real gem latterly if you do not compare it with its equally worthy sort-of peers, some mentioned, some not: FSICX, PONDX, OSTIX.
I like very much BERIX and AOK, but both have a good chunk in equities.

Charles

Using Accipiter's Miraculous Multi-Search, I screened for High Yield Taxable Bond Funds in Risk Group 1 or 2 that are also Great Owls...

Turned-up a pretty good list of options:

Charles

And then plugging say OSTIX into Chip's Risk Profile, I can see that Osterweis has done pretty well compared with other reference funds, like Vanguard's Total Bond and Balanced Index funds:

cman

Just to reinforce my point above that there is no free lunch and that all fund selection must be done in the context of a portfolio allocation plan, I recommend reading the following article before considering the above VALID recommendations for making your fixed income allocation.

You need to be logged into M* to read it (premium subscription not needed).

news.morningstar.com/articlenet/article.aspx?id=185307