Investors are often told that they should keep a cash reserve of three to six months worth of living expenses to pay for unexpected bills, such as a medical emergency, or home or car repair. But with money-market mutual funds yielding an average of barely 0.5%v and inflation over 2%v, your just-in-case money could actually be losing purchasing power with each passing day. Therefore, yield conscience investors may want to look at ultrashort-term bond funds as an alternative. Mutual Funds are sold by Prospectus only. Please carefully consider investment objectives, risks, charges, and expenses before investing. For this and other information please call to request a prospectus. Please read it carefully before you invest.
Ultrashort bond funds have shorter average maturities than most other bond funds. This means that their share price should fluctuate less whenever interest rates change. In addition, with yields that have averaged over 1% (through 07/24/03) for the past yearv, they are certainly worth a look. However, not all ultrashort bond funds are the same and can possibly leave you with negative returns.
Ultrashort bond fund managers have a goal to deliver a higher yield than money market funds. To meet this expectation, some have invested heavily in lower-quality issues and taken on significant credit risk in industries such as telecommunications or bank loan pools. When the economy takes a downturn, those bonds can lose value or default. Shareholders then end up with negative returns and discover that they may have been better off in a money market fund. For that reason, it is important for you to understand what the fund owns before you invest money.
Return the enclosed coupon if you would like more information on an ultrashort bond fund that I am currently recommending. It takes on minimal credit risk and can be a good alternative to money market funds as long as you don’t mind slight fluctuations in principal.
Note: Fees may apply when investing in mutual funds. Read the prospectus carefully before investing.
