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Playing the Yield Game

Get Jim Cramer's picks for 2006.

Here's a guess for 2006: Professor Plum with the high-yield bond fund in his retirement portfolio.

Sound right? No? Then how about Colonel Mustard with the REIT fund in his online brokerage account?

Like players in the enduringly popular board game Clue, investors searching for strong yields need to make difficult choices in order to prevail. Instead of fictional knives and lead pipes, however, the metaphorical "weapons" available to investors range from asset-backed securities to zero-coupon bonds and everything in between. Select the right one and you'll find yourself the big winner.

Pick the wrong one and you risk a big loss -- and we're not talking about Monopoly money.

With this in mind, surveyed a slew of mutual fund managers to get their opinions about the best places to find yield in 2006.

Playing It Safe With Treasuries

Back at the close of 2004, the yield on the benchmark 10-year Treasury note -- perhaps the least risky of all assets since it is backed by U.S. tax dollars -- stood at 4.21%. Back then, it was tough to find a bond fund manager not predicting a spike in long-term Treasury yields.

Some said the twin deficits -- budget and trade -- would finally weigh on Treasuries, sending yields higher in order to appease foreign investors. Others said inflation would force the Federal Reserve to kick the "measured" rate-hiking strategy it started in June 2004 into overdrive.

So what happened in 2005? Nothing. Well, the deficits widened, foreigners kept buying our bonds and the Fed stuck to its slow and steady approach, so most predictions were way off. But the 10-year Treasury yield barely budged and most recently was yielding just 4.5%. (And go easy on the fund managers. Even Fed Chairman Alan Greenspan was baffled by the refusal of long-term interest rates to rise, calling it a "conundrum.")
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