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Three Bond Funds for Retirement Income

05/20/2019 5:00 am EST

Focus: BONDS

Robert Carlson

Editor, Retirement Watch

Bob Carlson is a leading expert on retirement investing; here, the editor of Retirement Watch looks at three funds for those seeking income through bonds rather than equities.

DoubleLine Emerging Markets Fixed Income (DBLEX) doesn’t try to mimic an index. The fund’s analysts determine the outlook for each emerging market country and decide the countries where they do not want to have exposure.

The fund doesn’t own a country or a security simply because it’s in an index. DBLEX buys primarily bonds that are denominated in U.S. dollars. It largely avoids the currency risk so many emerging market bond funds take.

Finally, the fund emphasizes preserving capital ahead of earning high yields. The fund rose 1.59% in the last four weeks and 5.51% for the year to date. The yield is 5.31%. The largest country exposures are Brazil, India, Mexico, Chile and Argentina.

The largest industry exposures are banking, oil & gas, telecommunications, utilities and transportation. Almost 70% of the fund is in corporate bonds with the rest in quasi-sovereign bonds and sovereign bonds.

Last month, we added Wasatch Hoisington U.S. Treasury (WHOSX) to our model portfolio. The fund owns U.S. Treasury securities and can buy any duration of security. In recent years, its owned primarily very-long-term treasury bonds.

It expects interest rates to remain low and even decline because the economy is weak and inflation is going to stay low. The fund doesn’t try to trade shortterm market moves or respond to every utterance by Fed officials. It focuses on economic trends and established monetary policy.

Last year, the fund insisted that the Fed couldn’t maintain its policy of higher interest rates and its management team turned out to be correct. The fund gained 0.79% in the last month and 1.93% for the year to date. The yield is 2.19%.

I recommend Vanguard Treasury Money Market (VUSXX), or its Admiral shares if you meet the minimum balance requirement. Vanguard has the lowest-cost money market funds, and treasury-only funds are the safest.

You might find it more convenient to use a money market fund sponsored by your broker or mutual fund firm. If you want a higher yield, consider a fund that invests in more than treasury securities. The yield is 2.35%. It’s added 0.21% in the last four weeks and 0.67% for the year to date.

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