"Investors have fared well in US Treasuries, the top-performing asset class in 2008 with returns approaching 6.8%; but for new money Treasuries seem less compelling given the current paltry yields," says Benjamin Shepard.

In Personal Finance, explains, "To capture higher yields while taking advantage of the security of government debt, we're adding Fidelity Ginnie Mae (FGMNX) to our bond holdings."

"Government debt still makes sense from a safety standpoint, particularly if you're able to realize higher yields. Debt issued by the Government National Mortgage Association (GNMA) is the way to do that.

In these times of economic uncertainty many investors are taking a closer look at bonds and bond funds. But if individual investors are looking for a safe place to grow their savings, they should select funds carefully.

As the New York Times observed in a December 26 piece, Older Investors Should Examine the Risks in Bonds, "Because conditions may worsen before they improve, older investors should check that their bond investments are indeed what they thought they were--and that they fit their tolerance for risk." The article quoted Financial Counselors bond manager Gary Cloud: "We are in a 2 to 3 percent world, and if they want to earn more than that they need to proceed cautiously."

A WSJ January 4 piece In Search of Wall Street Bargains, carried Morningstar analyst Lawrence Jones' assessment of 2008 as an "absolutely brutal year" for most bond investors and observed: "Bond prices tumbled as investors anxious about the economic slowdown dumped corporate bonds and other obligations that carry the risk of default." Meanwhile, Treasury securities and the funds composed of them "delivered strong returns as investors bid up the prices of these safe havens."

Also on January 4, a Chicago Tribune piece, Bonds may be a shield, but they're still risky, echoed this theme. Noting that Steve Savage, editor of No-Load Fund Analyst, has advised individual investors to consider corporate bond funds and even high-yield bond funds, the Tribune warned, "Whenever yields are high, there is a good chance that financially stressed companies won't be able to repay their debts. In other words, bonds would default and investors would lose money."

"Investors should not forget that we tend to have the best news at market tops and the worst news at or near the bottoms; that means that a rising tide of bad news is an important part of the bottoming process," explains Keith Fitz-Gerald.

Emphasizing the need for patience in the current environment, the editor of The Money Map Report is maintaining a diversified portfolio including several quality income-oriented positions from Nuveen, PIMCO ad Vanguard. Here's a trio funds for safety and income.

"Nuveen Quality Income Municipal Fund (NYSE: NQU) seeks current income exempt from regular federal income tax. A lot of folks are fleeing munis right now because they're fearful of the credit crisis and an anticipated wave of municipal defaults.

"What makes NQU appealing is that it concentrates substantially all of its assets in a diversified portfolio of AA federal tax-exempt investments, which gives it an added safety cushion. Right now the taxable equivalent distribution rate is 9%.

"And don't forget: Right now it's selling at 7.97% below its net asset value. This gives us a super way to potentially achieve over 16% this year. That's especially appealing given how the markets are behaving lately.

"Like other US Treasuries, Treasury Inflation Protected Securities (TIPs) have virtually no credit risk," explains fund expert Mark Salzinger.

The editor of The No-Load Fund Investor adds, "Unlike other US Treasuries beyond short-term bills, however, TIPs also have no inflation risk." Here, he looks at an EYF based on TIPs.

"Twice a year, TIPs' principal valuis are adjusted upward by the amount of the increase in the Consumer Price Index Urban (CPI-U), thus protecting their holders against increases in inflation.

"The total return of the bond equals its yield plus the change in principal value based on inflation, changes in real interest rates (published interest rates minus inflation) and supply-demand in the market for TIPs.

"TIPs' yields are lower than those of regular Treasury sercurities of similar maturities. That's one of the disadvantages of TIPs.

"The other is that any increase in principal value due to the biannual inflation adjustment gets taxed every year as if it were received income.

"The latest annual rate of inflation measured from last July to this July was 5.6%, the largest annual gain since way back in January 1991," observes Alexander Green.

Here, the investment director for the industry-leading The Oxford Club suggests that investors consider the iShares Lehman TIPS Bond Fund (ASE: TIP), noting, "This is a great way to buy a diversified portfolio of inflation-adjusted Treasuries and track them quite easily."

"The latest consumer price index figures were a bit of a shock; the annual rate of inflation measured from last July to this July was 5.6%, the largest annual gain since way back in January 1991.

"Despite these horrendous inflation figures, gold, mining shares and other inflation-sensitive indicators did nothing – or even fell. What gives?

"Remember that the market is always looking forward, not back. Investors are always more concerned with what lies ahead than what happened in the recent past. Next month or next year may be a different story entirely.

"That's why every investor should have a hedge in his portfolio, like inflation-adjusted Treasuries. These bonds are unique in the investment world. They are the only investment guaranteed to beat inflation. And they are great portfolio diversifiers. They don't march in step with either stocks or bonds.

"We've added two bond fund's to our buy list: PIMCO Total Return (PTTDX) and Loomis Sayles Bond (LSBRX)," says Mark Salzinger.

The editor of The No-Load Fund Investor explains, "We favor both funds for many of the same reasons: both have experienced, top-flight management supported by robust credit-research staffs." Here's his review.

"Both bond funds have performed strongly over the long-term and during recent market turbulence. And each has a relatively open mandate that allows their respective management teams the flexibility to scoop up attractive bonds from diverse sectors of the bond market in pursuit of both capital appreciation and income.

"PIMCO Total Return is the world's biggest bond fund, and second large mutual fund of any stripe, with $128 billion in assets. The fund's popularity is a product of the outstanding track record and enormous reputation of its manager, Bill Gross. Its 10-year annualized return of 6% puts the fund in the top 5% of all intermediate-term bond funds over that time.

"Closed-end funds are a terrific way to gain diversified exposure to high-yielding foreign stocks," says global expert Nick Lanyi.

In his High-Yield International, he explains, "My latest closed-end fund pick, First Trust/Aberdeen Emerging Opportunity Fund (NYSE: FEO), gets income any which way it can from the world's fastest-growing economies." Here's his review.

"For U.S. investors looking to broaden their horizons, closed-end funds offer an easy way to gain exposure to a diverse mix of foreign stocks without venturing beyond U.S.-based stock exchanges.

"Not only that, they often provide access to stocks that don't trade in the U.S. -- including companies that only institutional investors (such as a fund manager) can buy.

"But these funds offer a bonus that mutual funds don't: in some cases you can purchase them at a discount to their net asset value (NAV) -- the underlying value of the fund's portfolio.

"That's because closed-end funds trade on the major stock exchanges, just like stocks. Their prices are determined by investor sentiment and supply and demand, in addition to the value of the investments they hold.

"Led by Brett Diment, the management team at Aberdeen Asset Management -- which specializes in emerging markets -- has assembled a portfolio that exposes investors to some of the fastest-growing economies in the world: Brazil, Mexico, China, India, Turkey, Argentina and Venezuela are among the fund's top holdings.

In the latest issue of his industry leading No-Load Fund Investor, fund expect Mark Salzinger reviews convertible bond funds, highlighting his two favorites.

Here, the leading fund authority looks at Fidelity Convertible Securities (FCVSX) and the "more conservative" favorite, Vanguard Convertible Securities (VCVSX).

"Convertibles are hybrid securities, often slight below investment grade, which can be redeemed for stock at a predetermined price and quantity.

"Because their values are often closely correlated to the value of the underlying equities, convertible bonds have more capital appreciation potential also more volatility than plan vanilla corporate bonds. However, because the value of their interest payments creates a floor of value, they tend to be less volatile than stocks.

"Our top convertibles pick is Fidelity Convertible Securities. The fund has been managed by Tom Soviero since 2005, since when it has generated an annualized return of 11.7% vs. 5.7% for Merrill Lynch All Convertible Index.

"Soviero is one of Fidelity's best portfolio managers. He favors convertibles that trade in line with the movements of the underlying equity's price and he wants the underlying equity to have an inexpensive valuation.

"Buy bonds," says income expert Neil George, adding "More and more folks are heading for the door on stocks and are moving toward quality."

The senior editor of Personal Finance explains, "This means bonds-but not just any bonds: government and upper-tier corporate bonds." Here's a trio of favorites.

"We start with AllianceBernstein Global High Income Fund (NYSE: AWF). This fund owns a collection of government and government agency bonds, along with some selected high-quality domestic and foreign corporates that add to our stability.

"We aren't just locked into the US and the US dollar; we have exposure to the best of Europe, Asia and elsewhere, too. The average duration (measurement of price against changes in yield) is a conservative but attractive 7.4 years.

"The fund generates a yield just shy of 8% and has given us a positive performance of near 100% during the past five years. It trades at a discount of more than 6% to meltdown value.

When financial world's mavens speak - - such as Alan Greenspan, George Soros, Bill Gross - - the markets usually take notice.

And when the mavens speak in unison regarding economic fundamentals, well, a word to the wise: be certain to record those data points before forming your own conclusion regarding the U.S. economy's health.

Soros, in a lecture at New York University, said the U.S. economy was on the verge of "a serious correction."
"I think we are definitely in for a slowdown that I think will be a bigger slowdown than (Federal Reserve Chairman Ben) Bernanke is seeing," Soros said, Reuters reported.