So, whatâs in store for 2009? Is there any vehicle thatâs safe?Â âTo many people, a safe investment is one where you wonât lose any money,â says financial planner Vicki Brackens of Brackens Financial Solutions Network, an affiliate of MetLife in Syracuse, New York. âIf thatâs your definition, and youâre looking for safety, you shouldnât be in mutual funds. Saying you want a âsafe investmentâ is like saying, âI want to go swimming but I donât want to get wet,ââ she says. âMutual funds have risks. Investors should focus on managing the risk theyâre taking in order to aim for attractive returns.â
Bond funds can be a key element in risk management. Investors tend to worry about accumulating losses over fewer yearsâand usually far less steepâthan individuals who purchase stock funds.
That doesnât mean that you should give up on equities; many have been winners over the long haul. Allocating fixed-income funds among your portfolio holdings can keep you from losing too much ground during bear markets though. Thatâs been true for Gerald and Evelyn Williams, both 61-year-old retirees living in Syracuse. Aside from cash and real estate, their investment portfolio is divided in the following manner: a third in bond funds and the remainder in stock funds, according to Brackens, their financial adviser. While the Williamsâ equity investments lost a little more than 30% in 2008, their bond funds produced a loss of roughly 11% last year, helping to ease the overall pain. âIt was a little scary,â Evelyn recalls, describing how she felt when their stocks slid last year. However, as Gerald asserts: âIt was not as bad as it could have been, because we are diversified.âÂ The two are still invested in a handful of bond funds, including the Loomis Sayles Strategic Income Fund (NECZX) and PIMCO Total Return Fund (PTTDX).