sell holdings at will, and will often do so to lock in gains or prevent further losses. That constant shuffling of assets makes bond funds act like stock funds, only with less in gains over time.
With that in mind, our list includes general bond funds, mixing corporate and government debt, and those that invest in government agency debt–an asset class practically as safe as Treasury bonds, yet offering a bit more punch for your money.
Maybe you’re looking to combine the growth of stocks with the shelter of bonds. If so, balanced funds could be your answer. By straddling both markets, balanced funds provide the best of both worlds: a stock portfolio with a 30% to 40% mix of bonds as a hedge when stocks have their troubles. For evidence, just look to the fourth quarter of 1997. Although equity funds on average lost 1.54% for the period, balanced funds managed to eke out a 1.15% total return, thanks to a strong bond market.
Who in their right mind would poke their nose overseas in a year when practically every Pacif
ic Rim nation west of Honolulu is caving in? An astute investor, that’s who. “If you’re young and adventuresome, it’s not a crazy time to look overseas,” says A. Michael Lipper. “And in some cases, you’ll find some bargains, if you’re willing to stick it out.” Or, as Sam Weiser, says, “if you don’t have any exposure to overseas markets, now might be a good time to take the dive.”
While we won’t steer you toward Asian funds just yet, especially when the IMF is still ironing out details of several bailouts in the Far East, consider a few things. First, many analysts say European economies are due for a recovery this year. Second, Latin American funds have outperformed domestic stock funds for the past two years. Looking over time, you’ll see that the Morgan Stanley EAFE index of European and Asian markets has posted an average annual return of 20% over the last five years and 16% over the last decade–impressive numbers that are comparable to figures for the S&P 500.
“The outlook is good,” says Wayne Weddington, president of Pennoyer Capital Management, a Manhattan international investment firm. “Our money is not in Japan, but Japan is up over 11% in January alone, a sign that troubles there could be over,” he notes. “And Switzerland, the U.K., Ireland and the Netherlands are all markets that could outperform the S&P 500 by 20% this year.”
Still chicken? Well, our list provides you a number of ways to invest abroad. If you’re up for a pure play of investment overseas, look at the list of international funds. If you’d still like to hold onto American shores a bit, global funds are a good way to mix U.S. market exposure with overseas stocks. And finally, if you’ve got no stomach to venture outside the country, you’ll be glad to know that investing in the largest U.S. companies is often considered an indirect means of