"The Perils of Chasing Higher Yields"
"The Perils of Chasing Higher Yields" from The Wall Street Journal says, "With short-term interest rates at historic lows, most traditionally safe investment options have yields you need a magnifying glass to see. As a result, many investors are turning to intermediate-term, mortgage-backed and other relatively risky bond funds for a better return. By doing so, however, they may be forgetting last year's lessons about not putting money you might need soon at risk.... Painful as it is to accept the yields, short-term options are still the best way to preserve money you are going to need in the next few years." It adds, "But as the economy recovers, interest rates could soar, sending bond prices tumbling. That could make intermediate-term bond funds poor choices for money you'll need in the next couple of years to live on, pay tuition or make a down payment on a house. If interest rates surge, longer-term funds can cost you.... So what's really safe? Your best bets are bank savings accounts, certificates of deposit or money-market funds, which at best are offering annual yields of 2%."
