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Over the past six weeks, shrewd small investors have minimized their losses in bonds by favoring issues with maturities of about five years, according to data gathered for Money magazine's Small Investor Index. Such bonds yield a bit less but are far safer than long-term issues.

Since early April, bond mutual funds, which yield as much as 9 percent, have attracted $10 billion of new money, mostly from money-market funds that now pay an average of only 5.6 percent. But even though individuals are reaching for higher yields, they have focused on short- and intermediate-term bond funds, which typically have average maturities of seven years or less and yield around 8 percent.That trend is picking up speed, according to major mutual fund groups. At Franklin, for instance, sales of the $68 million Short-Intermediate U.S. Government Fund, yielding 8.3 percent, shot up 37 percent in May from April's level, while sales of the $11.7 billion U.S. Government Securities Fund, with a 9 percent yield and a 25-year average maturity, dropped 2 percent.

Giving up a little yield to reduce risk sharply has been a smart choice so far. Since May 1, yields on 30-year Treasury bonds have risen from 8.1 percent to 8.6 percent, causing bond prices to drop as much as 5 percent, while yields on five-year Treasuries have gone up from 7.8 percent to 8 percent, resulting in losses of only one-quarter percent.

However, bond market analysts think it may soon be time to start buying long-term bonds. "If yields go above 8.75 percent, bonds will be a steal," says Heiko Thieme, manager of the American Heritage mutual fund. "Within 12 months, rates on long bonds could plunge to 7.5 percent, providing double-digit total returns."

Last week, Money's Small Investor Index, which tracks the performance of the average individual's holdings, fell $249 to $44,836. Stocks dropped $222, while bonds lost $54. CDs and money funds gained $21.