On Tuesday President Obama told ABC’s Nightline, “Wall Street, I think, is hoping for an easy way out of this thing and there is no easy way out.” Although he’s pushing a nearly trillion dollar stimulus package, the newly-elected chief executive is still suggesting tough times are ahead. The markets reacted by heading lower. The lack of confidence in the stock market is almost palpable. Without a strong reassurance, it’s difficult for everyday investors to bet on a positive short-term direction.
Markets Still Uncertain: Where to Go Next
As we mentioned last week, we are still partial to cash-like options. If you hold relatively stable assets in your investment accounts, you won’t expect giant swings in either direction. Your principal is safe and maybe even a little boring, but at least you will sleep better at night. You won’t be unpleasantly surprised next January when you open your end-of-year statements. Right now we like low-risk options. Cash is one of those options, but there are others.For instance, high quality bonds could meet your risk tolerance. Granted, bonds carry more risk than CDs or money market funds. However, quality fixed-income assets add a new dimension to your portfolio, especially if you’re only investing in stocks right now. Yes, you must be willing to lose 4% to gain 4%, but that’s a small price to pay to get a return in this environment. In fact, it may be one of the better plays right now.
A Total Return Fund in Bonds
If you’re ready to dip your toe in the fixed income side of the pool, you should consider PIMCO’s Total Return Class D Fund (PTTDX). This 5-Star Morningstar rated fund holds high-quality, intermediate-term bonds. The fund seeks to maintain capital while seeking a modest return goal in interest, capital gains, dividends, and distributions. Managed by Bill Gross himself, PTTDX is PIMCO’s flagship mutual fund available for everyday investors. There are two compelling reasons you should consider PTTDX for your portfolio.
#1 Bill Gross Knows The Fed
If you’re going to buy a bond fund, there’s no better place to go than PIMCO. Founded by the “King of Bonds”, Bill Gross, the Pacific Investment Management Company knows fixed income. Moreover, former-Fed Chairman Alan Greenspan is now a consultant for PIMCO. In addition, Gross is in regular deliberations with the current Fed chairman. Given that bonds are directly tied to interest rates, it only seems prudent for PIMCO to be privy to such conversations. Bill Gross makes full use of his connections in Washington.
#2 Stable Returns in Difficult Environment
At a time when many funds are reeling from market blows, PTTDX has weathered the storm. Last year, as the S&P 500 dropped -37%, PTTDX gained +4.5%. Most of us would have been very pleased with those results. Since inception, PTTDX has gained in nine out of ten full years. This year, PTTDX is up +0.59%. Although this fund cannot boast many double-digit return years, it hasn’t suffered the way most equity-based funds have. To go with a bond-based, total return fund in an uncertain market, buy PTTDX.