Many people flocked to short term bond funds in the past few years hoping to earn a rate of return higher than their bank accounts and money market accounts were paying. The relatively higher yields were attractive, and the fact that these funds invest in “ultra short” or “short term” bonds, made investors feel comfortable about owning something that they thought was safe.
Unfortunately, some people are paying for making assumptions like that. Check out this Yahoo Finance article about the Schwab YieldPlus Fund for the full scoop:
People need to be fully aware of where there money is. Many experts are recommending keeping your “safe” money in places that are explicitly FDIC insured or directly in government bonds. This way, you have federal guarantees on your principal. Whether you should consider doing this is something that you and your advisor should discuss.
Chris Grande
3.27.08
