Four Safer Retirement Strategies in 2009 By Chance Carson

The end of last year proved to be bad news for almost all investment asset classes except U.S. Treasury Bonds. The ongoing flight to safety has rendered retired investors bewildered. Investors are struggling to find safety and reasonable rates of return.

Many investors are wondering if Treasuries will be the best choice for 2009. Not likely, according to Pimco Chief Investment Officer Mohamed El-Erian, who advises against owning those types of bonds since they have become too expensive. Andrew Bary punctuated that same sentiment in a Barron’s article, (January 5, 2009: http://online.barrons.com/article/ ) entitled, Get Out Now.

So, what other asset classes might provide relief to beleaguered investors in search of steady income and safety of capital in 2009? A growing number of experts suggest the following four asset classes may indeed fill that bill. We will discuss the first three. The fourth was already published; see the link below.

* Mortgage Backed Securities * Treasury Inflation-Protected Securities-TIPS * Municipal Bonds * Investment Grade Corporate Bonds

1. Yields on mortgage-backed securities have been declining ever since the Federal government November 2008 announcement that it would purchase up to $500 billion of Ginnie Mae, Freddie Mac and Fannie Mae home mortgage-related bonds. But with the purchases just beginning in January, current yields of this battered asset class still look attractive relative to historical levels. Also, with the Fed’s intervention, mortgage-backed securities now offer effectively the same Federal guarantee as U.S. Treasuries, but with higher yields. Consider iShares Barclays MBS Bond Fund (MBB), iShares Barclays Agency Bond Fund (AGZ) and SPDR Barclays Capital Mortgage Backed Bond ETF (MBG).

2. At the moment, TIPS prices are headed lower with fears of deflation. However, if the Federal stimulus packages prompt inflation, as many believe, TIPS will correspondingly produce better results. You will likely read many other articles on TIPS, so pay close attention to these two products; (TIP) iShares Barclays TIPS Bond Fund and (IPE) SPDR Barclays Capital TIPS, both on the NYSE.

3. Municipal Bond tax-free yields have reached historically high levels as Municipal bond prices plummeted in November 2008. Although prices have recovered and yields have waned since the bottom, municipals still offer remarkable value compared to U.S. Treasuries. With today’s 4-5% tax free distribution rates, investment-grade municipals look like a bargain (a 5% tax-free yield for a taxpayer in the 35% Federal tax bracket is the taxable equivalent yield of a Treasury bond paying 7.4%). Municipal Bond ETFs worth considering include PowerShares Insured National Municipal Bond Portfolio (PZA), iShares S&P National Municipal Bond Index Fund (MUB) and SPDR Lehman Municipal Bond ETF (TFI).

For state-oriented bond choices, California may significantly benefit from Federal stimulus spending geared to infrastructure. If so, the iShares S&P California Municipal Bond Fund (CMF) looks like a good bet. California is likely to be high atop the list of states receiving more Federal assistance due to its political clout and economic size.

If your overriding priority is safety, you should look into (PRB) US Market Vectors Pre-Refunded Municipal Index ETF. This ETF uniquely invests only in pre-refunded municipal bonds. These bonds are issued to pay off existing bonds with higher rates and have the equivalent of a full US government guarantee of interest and principal.

4. High-Grade Corporate Bonds, also known as Investment-Grade Corporate Bonds, are very cheap at today’s prices. Portfolio managers are currently buying corporate bonds issued by money-center banks, brokers and the largest insurers, as the ongoing government bailout may mitigate some of the risks of corporate defaults. For more details, read the www.AboutETFs.info article that focuses on corporate bond ETFs here: http://aboutetfs.info/Monthly-Income-Strategies.php .

In summary, the four classes we mentioned here may suit your style for retirement-oriented, safer investments for 2009. We are presently researching preferred stocks and senior loans as other options for retired investors. Stay tuned to our websites for those articles and reports.

As always, results are not guaranteed and these strategies may not be suitable for your personal investment objectives. You should consult with a professional before buying or selling any securities. This article is not intended to be investment advice for the purchase or sale of any mentioned securities.

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