How to Gross Out Your Portfolio

4. Treasury Inflation-Protected Securities

Gross didn't have to travel very far when he was looking for a solid TIPS fund. He just put his money into Pimco's ( PRAIX Quote)Real Return fund.

"In terms of pure skill and ability to outperform, Pimco Real Return fund takes the cake," says Morningstar TIP fund analyst Eric Jacobson. According to Jacobson, Pimco gooses returns in its Real Return fund through an enhanced strategy called "Bonds Plus" whereby it borrows money at the London interbank offered rate, or Libor, and invests it in a short-term duration bond portfolio. Jacobson says the Pimco fund also receives an additional kick because the portfolio manager doesn't confine himself to U.S. Treasury TIPS. Corporate bonds are often thrown into the mix as well.

Despite the fund's savvy financial strategies for outperformance, portfolio manager John Brynjolfsson views lowering risk in his fund as being equally important as adding return. "We see risk as the flip side of the coin to adding value. Our job is to find those sources where we can add the most value with the least added risk," says Brynjolfsson. "Pimco's experience and resources put us in a good position to deliver on that goal."

Investors looking to follow Gross's lead but favor plain-vanilla TIPS funds might try Vanguard's ( VIPSX Quote)Inflation Protected Securities fund or Fidelity's ( FIPAX Quote)Inflation Protected Bond fund.

One note of caution on TIPS despite Gross's allegiance to the asset class: When inflation is dormant and interest rates spike (as they did last summer), TIPS can see larger losses due to the long maturity and small coupon.

5. Global bonds and Equities Denominated in Nondollar Currencies

There are a number of funds with strong track records in this category. Lynn Russell of Morningstar suggests that investors take a look at the ( CINSX Quote)Blackrock International Fund and the T. Rowe Price ( RPIBX Quote)International Bond Fund.

Both funds stick to bonds issued by developed countries, although T. Rowe's fund tends to lean heavier on Japanese debt than euro-land nations. Neither fund sports a load and both maintain similar expense ratios around 0.9%.

Russell says the key to the success of these two funds is their ability to handle the volatility inherent in currency exposure. And with the dollar's decline, unhedged global bond funds have been winners over the past year. However, Russell is quick to remind investors that "it can move in the other direction as well."

"When it comes to global bonds, the three most important things are country, currency and interest rate risk," says Russell. "This is not as straightforward as blue-chip stocks."