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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."

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Picking the right bond fund to stash your cache and grow it safely originally appeared on BloggingStocks on Mon, 12 Jan 2009 13:01:00 EST. Please see our terms for use of feeds.

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