Conference nyoss1::market_investing

    re: .0
    
    You may consider a shortterm bond fund or a GNMA fund. These funds
    generally pay a higher rate than money market funds or short term CDs.
    But, they do have minor share price fluctuation. If you can take some
    risk with your money, these funds may be a good choice for you. You may
    also want to look into tax exempt bond funds. If you are in the higher
    tax brackets, these may be right for you.
    
    Mike

    Fidelity Short Term Bond Fund is a no load fund paying about 7.5%
    currently. Share prices fluctuate very little (percentage wise). Call
    Fidelity at 800-544-8888 and ask for a perspectus. It will give you a
    table of yearly high and low prices, among other things, so you can
    check to see if it meets your requirements.
    
    You can also set up a free checking account with this account, so you
    have instant access to your money. I keep a good part of my free cash
    in this fund instead of a bank account since it pays more than 2X what
    banks pay and I'm willing to take the small risk.
    
    Ray

    IMHO, bonds are putting in a major top right now and any money invested
    in long or intermediate term bonds will result in a capital loss later.
    
    Getting a sub-3% return in a money market fund is better than taking a
    capital loss, especially if this is a lot of money for you.
    
    I recommend one of the Capital Preservation funds from Benham,
    basically T-bills and/or very short term Gov't. instruments.  
    1-800-4SAFETY.
    
      John

>     Getting a sub-3% return in a money market fund is better than taking a
>     capital loss, especially if this is a lot of money for you.

There are "can't loose" investments:
	- US Savings Bonds: pays 6% if held for more than 5 years,
	- CD's with FDIC banks,
	- US Treasury Bill, notes and bonds.

Buying into a bond fund is not the same as buying US Treasuries
directly. As John points out, bond funds could result in a capital
loss.  When you buy US Treasuries, directly, you get the coupons and
the principal back (unless the US Treasury defaults).

US Savings Bonds are one of the few investments where the "small"
guy wins. You can buy "only" $15,000/year

Gim

    re: .3 & .4
    
    .0 is asking for a short term investment (less than 18 months) and is 
    willing to take limited risk. Also, she doesn't want to get the low
    money market rates or short term CD rates. I don't think your 5+ year
    bond recommendation fits her description. Yes of course, she can buy
    "notes" or "bills". But, they are not paying much either. The only way
    I can see to have 6-8% return with limited risk and short term
    liquidity is buying bond funds. Sure the share price will fluctuate.
    But, just as .2 said, the % change is rather small - therefore, limited
    risk.
    
    Mike

    Gim and I have this argument from time to time.  I guess it's
    that time again.
    
    Certain fixed-denomination debt instruments, such as:
    
.4>	- US Savings Bonds: pays 6% if held for more than 5 years,
.4>	- CD's with FDIC banks,
    
    have a fixed price and therefore are [mistakenly, IMO] thought of as
    being "can't lose" because the denomination is a fixed amount.
    
    But in fact you CAN lose because you CAN'T SELL that CD!  You are
    forced to sit and collect 4% or whatever because that's all you can do.
    If interest rates rise (or fall) you do not earn more (or less), nor do
    you have any choice -- "penalty for early withdrawal".  If you're
    collecting 4% when rates zoom to 8% you are taking a loss, despite the
    fact that you ultimately collect $1000 nominal dollars.
    
.4>	- US Treasury Bill, notes and bonds
    
    The $1000 30-year bond auctioned last week can be sold anytime, but if
    interest rates rise you won't get $1000 for it, you might get $980 or
    (in the present case) $1020 because rates have dropped.  The price you
    can get for the bond corellates with the price of similar bond funds.
    Forget the $1000 "face" value -- that's only if held to maturity.
    The free-market price varies with the expected value of the cash flow, 
    which is as it should be (in a free market).
    
    If you hold a liquid instrument -- one that can be bought or sold --
    then its price rises or falls with interest rates.  If you hold an
    illiquid instrument the price may be fixed BUT THE VALUE OF THE MONEY
    IS NOT, so it is an "illusory" no-lose proposition.
    
    What is the value of a $1,000,000 note signed by me, to be paid out of
    my lottery winnings?
    
      John

RE: 388.6 by VMSDEV::HALLYB "Fish have no concept of fire."

.4>	- US Savings Bonds: pays 6% if held for more than 5 years,
.4>	- CD's with FDIC banks,
    
>    have a fixed price and therefore are [mistakenly, IMO] thought of as
>    being "can't lose" because the denomination is a fixed amount.
    
>    But in fact you CAN lose because you CAN'T SELL that CD!  You are
>    forced to sit and collect 4% or whatever because that's all you can do.

In the case of US Savings Bonds you can cash them in anytime.  They are "can't
lose" investments even more than a money market mutual fund is.  If money 
market funds start paying (significantly) higher rates,  cash them in!

In the case of a CD,  the risk of higher interest rates is capped at the
"significant penalty for early withdraw".  If it's three months interest at
4%,  at most you can lose 1% of your investment.


Phil

Phil came to my defense - thanks.

Let me provide an example. I have $10,000 to invest. I can
put it all in a bond fund as one noter suggested or buy savings bonds.  

Assume that John is correct and in 6 months and the interest rate sky
rockets.  The bond fund will take a beating  and loose up to 10-30% of
its NAV.  I'm left with $7,000-9,000 depending on how high the interest
rates goes. Not  a pretty picture.

If I had purchased savings bonds, I can cashed them in for what I paid
for them plus about 4% if held for one year.  I'm left with $10,400.

On the other hand, if interest rates drop, the bond fund goes up in NAV.

With individual bonds and Treasuries, you are assured of the face value if held
to maturity. You can't make that statement about bond funds.


If you are buying savings bonds, keep the following in mind:
	1. the interest is free of MA income tax (I live in MA),
	2. the interest is tax deferred (until you cash them in),
	3. bonds purchased on the last day of the month
	   earns interest from the first day of the month,
	4. after some period (first year?), bonds accrue interest
	   on a six  month basis.

I'm personally keeping my cash to a miminum and buy savings bonds on
monthly basis - naturally during the last week of the month.

Gim

    
    	Re: .6
    
>   What is the value of a $1,000,000 note signed by me, to be paid out of
>   my lottery winnings?
    
    	Hmmm, interesting question.  If the note stipulated that you had to
    play something like Megabucks at least once a week (a $1 ticket) and all
    winnings had to be applied to the note until the $1,000,000 (and
    interest) was paid off, my guess is that note would be worth around,
    oh, $500 or so.  Surprisingly high given the face-value (no pun
    intended) facitiousness of the question.  :-)
    
    							-craig

    
    	P.S. to my .9
    
    	Ok, so its been a long day...  ;-)
    
    					-craig

  This assumes that you have any debt. If you have a loan that you are paying
  (for example) 10% on and you want to get a 10% return, just pay it off.
  This is a conservative view I know but it's an easy way to free up 10% of your
  cash flow. This certainly doesn't deal with the rat hole of saying " but if I
  invested that 'x' dollars at 15% percent someplace else I'd net 5%". That's
  a choise you have to make.

  Most articles that I've read in financial rags that deal with the general 
  question "where should I invest 'x' dollars..." list paying down debt at or
  near the top of their list.


  Pat

    I agree,especially in a difficult investing environment. Paying down 
    debt,should be a top priority. We are not in a high inflation
    environment and taxes are still relatively low .

>    I agree,especially in a difficult investing environment. Paying down 
>    debt,should be a top priority. We are not in a high inflation
>    environment and taxes are still relatively low .

Does this apply to just a debt with a high interest rate that can't be 
easily refinanced?  Eg, student loans or car loans.

I mean, if rates are low, then isn't it a good time to take on a debt at a
nice low rate - that perhaps you may have been putting off...?

Dan

    
    re: "can't lose" investments
    
    You can lose value with all investments... remember, in the end you
    need to subtract off inflation from the nominal return to get your
    real return.  It is not simply the capital loss you'd take by selling a
    bond early vs not take by holding till maturity.  
    
    Remember that the *present value* of the bond, if sold prior to
    maturity, is higher than the same number of nominal dollars received at
    maturity, so while you'd take a capital loss, you could reinvest that
    money at a higher rate until the maturity date (or beyond).  The market
    value of the bond simply reflects this discounting mechanism, so yes, 
    you can in fact lose present value, even if it's a sure thing in
    nominal dollars.
    
    /Jim