Facebook Twitter

STILL PLENTY OF WAYS TO EARN DECENT INVESTMENT RETURNS

SHARE STILL PLENTY OF WAYS TO EARN DECENT INVESTMENT RETURNS

Now that yields from fixed-income investments have stopped sliding and prices have stabilized, what's out there for you? Plenty.

Here are some ways to earn decent returns:Treasury bonds: Interest is exempt from state and local taxes, payment of principal is guaranteed on maturity and bonds can easily be resold.

In late April, five-year Treasury notes yielded 6.5 percent to maturity.

Long-term Treasury bonds recently yielded about 7 percent, and inflation probably won't top 3.5 percent.

Historically, fixed-income investors are lucky to get yields more than two percentage points above inflation.

You can buy Treasury bonds directly without commissions (Bureau of the Public Debt, Washington, DC 20239; 202-874-4000). Or try a Treasury-bond mutual fund.

It's important to closely track the market in yields and returns. One that keeps expenses low is Vanguard Fixed Income (no load; 800-635-1511).

Municipal bonds: These tax-exempt bonds could outperform Treasuries and high-grade corporates.

A five-year, AAA-rated muni yielding 4.2 percent produces a 7 percent taxable-equivalent yield in the top tax bracket; a five-year Treasury note recently yielded only 5.8 percent.

Sit Income Tax Free (no load; 800-332-5580) is a favorite of John Rekenthaler, a Morningstar Mutual Funds editor. It recently yielded 6.03 percent, equivalent to 8.3 percent in the 28 percent tax bracket.

Corporate bonds: Last year Harbor Bond fund (no load; recent yield, 5.49 percent; 800-422-1050) anticipated the end of falling interest rates in the United States and began to focus on income rather than capital appreciation. It returned an annualized 13.6 percent over the past three years.

Corporate junk bonds: Low-rated corporate issues have enhanced returns of many mainstream bond funds for the past three years.

You get an even bigger pop with a pure junk-bond fund, such as T. Rowe Price High Yield (no load; recent yield, 8.5 percent; 800-638-5660).

But the last time the junk-bond market tanked, the fund lost almost 11 percent.

Closed-end funds: Bought and sold like stocks, they offer big gains to those who find a fund selling at a discount to its net-asset value (NAV).

Pacific American Income Shares (PAIS; NYSE; recent price, $15; yield, 8.1 percent) consistently ranks near the top in total returns among closed-end funds dedicated to investment-grade bonds.

The fund recently sold at a 5.3 percent discount to its NAV of $15 per share.

Real-estate investment trusts: Yields and total returns from REITs are about the same as those produced by a good corporate bond fund.

New Plan Realty (NPR, NYSE, $22; yield, 6.1 percent) stands above the crowd. It owns 110 properties in 18 states, and dividends have risen for the past 14 years.