Conference nyoss1::market_investing

    Is this money in an IRA or 401(k) plan?  If it's not tax
    advantaged, you should realize that you'll be paying income
    tax on "phantom" income from the zeros.
    
    I'd worry about the inflation risk the zeros have, too: we
    currently have a rate that is low compared to the recent past
    and any increase would radically reduce the value of the bonds
    at maturity.  Personally, for the relatively long period of
    eleven years I'd be tempted to put the "keep this part safe"
    money in a medium-term bond fund to reduce the risk from 
    increases in inflation.
    
    Remember also that you don't reach retirement at 65 and then
    die (knock wood!).  You're likely to live to 80 or more, so
    you're really planning for a span of (+11..+30) years from
    now, and so your "average" dollar is going to spend some 20
    years growing in a quiet place.  So one-half to three-quarters
    in equities sounds about right.
    
    		-John Bishop

    You "buy" an 8% Zero of 2005 (say) for $350 and in 2005 (August?) you
    are promised $1000 in return.  About a 3-for-1 deal at current interest
    rates.
    
    Points to ponder:
    
    - What will $1000 buy you in 2005 compared to what $350 buys today?
      Nobody knows, but you are betting at least the same purchasing power.
      One good shot of 1970s style inflation will likely destroy the value
      of this investment.  A repeat of the 1930s would be a benefit.
    
    - Zeroes are the highest-risk bonds at a given maturity.  Reward is
      commensurate with risk in this case, so consider it a matter of risk
      management instead of risk avoidance.
    
    - Will the government actually pay off?  As opposed to defaulting or     
      nationalizing your account.  (Not likely, but neither is your house
      likely to burn down; yet you carry insurance).
    
    - If you make this investment, consider the Benham Target 2005 fund,
      which is a true no-load U.S. Treasury zero fund.  Don't let this guy
      sell you a load fund even if it claims to offer higher yield because
      it's selling repackaged <insert non-treasury government agency name>
      bonds.  That higher yield is likely to become his commission and all
      you get out of it is increased risk.  [Broad generalization there].
    
    - Many corporate zeroes are pure junk; a real minefield best avoided.
      Likewise anything having to do with collateralized mortgages; they
      are incredibly complex and have poor risk/reward characteristics.
    
>    	The remainder he would invest more aggressively looking
>    	for a portfolio that would provide 12%-16% annual growth.
    
    Why doesn't he just invest all your money in a portfolio that would
    provide 12%-16% annual growth?  Because, of course, there's no way he
    can be sure of getting ANY growth.  Just because part of your portfolio
    is earning 8% doesn't mean the rest of it will earn 12%+.
    
    I'd be really wary of anybody to spoke to me like that.  Of course, if
    you think we're on the verge of another bull market then those numbers
    are quite plausible.  In which case you don't need his advice; pick any
    of the mutual funds discussed elsewhere in this file.  Buy.  Hold.
    
      John

With interest bearing bonds, you get interest payment every
quarter or whatever the payment period is.  It's up to you
to re-invest the interest; you may or may not be able to get
the same rate on re-investment of the interest payment.

This is not the case with zeros. The interest rate is guaranteed to
maturity.

Regarding "gov't backed", I would make sure that it is US Treasury
Notes/bonds; not gov't guaranteed, not federally backed but real US
Treasuries where the coupons are "stripped" away.

As .1 pointed out, zeros, if they are not in an IRA are taxed as if
the interest were paid out.

Regarding zeros vs bond fund:

With zeros, both the interest rate and redemption value are known.
With a intermediate term bond fund, the yield and the NAV in 10 years is
not known - though you can make some educated predictions.


Gim

> Regarding zeros vs bond fund:
> 
> With zeros, both the interest rate and redemption value are known.
> With a intermediate term bond fund, the yield and the NAV in 10 years is
> not known - though you can make some educated predictions.

    The Benham 2005 bond fund matures entirely at par on the maturity date.
    The NAV and the yield are known precisely.  The entire fund consists of
    bonds and coupons payable on the same date in 2005, plus a small amount
    of cash to handle early redemption requests.  In this way it is no 
    different from a zero you bought yourself, just a lot more convenient.
    
      John

    Re. Benham bond fund
    
    Do you have their toll free #?
    
    
                                        JRW
    

Problems with the Benham Target funds is the stated yeild is somewhat less 
than the yeild of a Tzero with the same maturity date (even after paying the 
spread),  and the real return of the fund is not fixed,  but might vary from 
the stated yeild.

The advantage is that the Benham funds are much more liquid.  A odd lot of 
zeros (less than a million? $) has a wide bid-asked spread.

I have some Tzero's in my IRA.  


Phil

    Re: .4 by John (McEnroe) Hallyburton,
    
    Your quite right about Benham Target funds they can be considered to be
    synthetic zeros.
    
    In reading the notes here, some noters have predispositions to
    certain fund families. (I tend to use Vanguard - the Index 500 and the
    Wellsely fund).  Why do some folks like the Benham family?  
    I don't want to miss out on a good thing.
    
    Gim
    
    

    Benham's number is 800-4SAFETY
    
    I'm not so much a cheerleader for Benham as I am pleased with their
    fund selection.  There aren't too many zero coupon single maturity date
    funds.  Their Capital Preservation Fund is exclusively T-bill for those
    of us who are truly paranoid.  And all their funds are pure no-load,
    no-hype, no-BS.
    
    Plus, Jim Benham has a reputation in the bond market similar too that
    of Peter Lynch in the stock market, though he's not as widely known.
    
    Vanguard runs a quality index fund but since I tend to switch a lot
    I have my index fund money with Rushmore.  It's all a matter of who
    best meets your needs.
    
      John

    FYI,
    
    FOR INFO ON BENHAM ACCOUNTS:       (machine like DECtalk)
    You can call 1-800-321-8321
    first menu enter:
    1
    enter 1 again:
    Now in fund section:   enter fund # for quote
    62 = Benham target maturity 1995 
    63 = Benham target maturity 2000
    64 = Benham target maturity 2005
    65 = Benham target maturity 2010
    66 = Benham target maturity 2015
    67 = Benham target maturity 2020
    It also tells you the yield for the past 30 day period.
    Other options give you history of each fund, etc. 
    There is a help "menu" to prompt you through.

I thinking of moving some of my IRA account over to zero-coupon bonds. Are
there any mutual funds investing in zeros ? I have already discovered the
Benham Target maturity funds, and will be using these if I can't find 
any other fund. Comments on zeros ? Comments on Benham ?

Thanks,
Mark

I have read that there are tax-free zero coupon bonds. Anyone know of a mutual
fund investing primarily in tax-free zero coupon bonds ?

Are any of the closed-end bond funds investing primarily in zero ? (taxable or
tax-free ).


Mark