Safe investment

[tvz]

Hi. I'm looking for a place to put some $ that needs to be very safe, but earning what I can (like most people). My mutual fund company (Sentinel) has a "Government Securities Fund" that has quite consistently earned about 5 - 6% for the past ten years (including for the past three years).

On the other hand, they have a "Short Maturity Government Fund" which has only been getting 1 - 4% over that time period.

It seems obvious that the first one is better, since it seems pretty safe--it never has lost $ during a year. However, is there some advantage to the Short Maturity fund? Why would anyone use it rather than the other?

THANKS
-TVZ

[disneysteve]

The longer the maturity of a bond fund, the more risk it entails, hence the higher returns. If interest rates start to creep up, the yield on those intermediate to longer term bonds will fall more than with a short-term bond fund.

[tvz]

Thanks!

Thanks, Steve!

[jpg7n16]

What is the investment goal for the funds?
What timeframe do you need it invested for?

[tvz]

These are our funds that we might need to draw on at any time if something unexpected comes up; or, we may end up not needing them for years. So we definitely wouldn't want something like equities, which might significantly lose value.
Thanks.

[kv968]

The longer the maturity of a bond fund, the more risk it entails, hence the higher returns. If interest rates start to creep up, the yield on those intermediate to longer term bonds will fall more than with a short-term bond fund.

The YIELD on the longer term bond funds won't necessarily fall, but the price of the bonds it holds will so the NAV will go down. In that case you'll have a capital loss.

[disneysteve]

The YIELD on the longer term bond funds won't necessarily fall, but the price of the bonds it holds will so the NAV will go down. In that case you'll have a capital loss.

Thanks for correcting that.

[tvz]

Thanks a lot, guys! That clarifies it.

[jpg7n16]

These are our funds that we might need to draw on at any time if something unexpected comes up; or, we may end up not needing them for years. So we definitely wouldn't want something like equities, which might significantly lose value.
Thanks.

Since this is essentially an Emergency Fund of sorts, it should be kept in a very liquid account. Though it seems you want to be a little more aggressive with it to get a higher return.

If that's the case, I'd recommend keeping about 3 months expenses in a money market fund. And investing the rest in one/both of your options (you can always split it 50/50 and get some of the benefits of both).

And I agree, if this is an EF, equities are not an option. Too much short term risk.

[humandraydel]

Personally, I would be very wary of dumping a bunch of money into intermediate term bonds right now. Interest rates are so low there is nowhere to go but up (which means the value of current bonds will go down). Of course people have been saying the same thing for 1-2 years.

[Mr Nice Guy]

Didn't Benny come out a couple weeks ago and say they were keeping interest rates low through 2013?

[tvz]

I guess that nothing concerning investing is simple! Thanks for all the good info, everyone!

[frankhoward]

Safe investment

Capital Gains Bonds are instruments which offer tax exemption for transferring gains of long term capital assets. At SafeInvest, we offer Capital Gains Bond under Section 54EC of the Income Tax Act, 1961.The Investment in these Bonds is to be made within six months from the date of such transfer of capital assets (Land/House Property etc.) for being exempted from Capital Gains Tax.settlement-cash-structured-for-flow

[Gina23]

Didn't Benny come out a couple weeks ago and say they were keeping interest rates low through 2013?

I was thinking the same thing... I'm planning to dump my Intermediate Bond fund by the end of this year and put it somewhere else.

[vips]

Most probably people think to invest in safe places such as under government sector or banks where they can get returns with low risks. But some people invest with maximum risk to get maximum returns. For safe investment post office and banks are most popular places.