10 Bond-Fund Refuges From Stagflation
The price of petroleum has slipped back in recent days, but talk of stagflation hasn't. According to Google news searches, 3,392 articles mentioned the dreaded "S word" in the week ended July 23, up from an average of 906 for each of the four previous weeks.
The "stag" -- for stagnation -- in stagflation translates into a major detour in the road to corporate profit growth, making equity investments far less likely to pay off. The S word's "flation" suffix -- for inflation -- can prove a killer for hopes of achieving returns on bond funds that exceed the acceleration in the cost of living. Stagflation is defined as a period of rising inflation and sluggish growth.
With the more traditional economic contractions, "cash equivalent" investments such as short-term Treasury bills or money market mutual funds provide refuge from crumbling equity valuations. But stagflation even tarnishes the appeal of money market instruments, as the inflation component of that economic malady can exceed short-term returns, thus eroding their purchasing power.
For those believing that the bear market isn't finished and that stagflation remains a threat, we parsed TheStreet.com Ratings fixed-income fund database for bond funds that might insulate investors from the insidious impact of economic stagnation combined with inflation.Stability and preservation of capital were the primary considerations in filtering the database for open-end bond funds with characteristics would help investors who feel threatened by stagflation:
|10 BOND FUNDS FOR SAFETY-CONSCIOUS INVESTORS|
|NAME, TICKER & TheStreet.com RATINGS GRADE||YR-TO- DATE RET'N (%)||12-MO. TOTAL RET'N (%)||12-MO. PRINCIPAL CHANGE (%)||CURRENT YIELD (%)||12-MO. STD. DEV'N (%)|
|Allegiant Ltd Maturity Bond A (AINRX) B||2.08||5.87||1.84||3.46||1.72|
|American Century Sh-Term Govt Inv (TWUSX) A *||2.45||6.89||2.58||3.92||1.98|
|CNI Charter Government Bond N (CGBAX) B *||1.80||6.23||2.06||3.54||1.85|
|Dreyfus Sh-Interm Govt (DSIGX) B+ *||2.36||6.31||2.42||3.19||1.89|
|Lord Abbett Invt Tr Sht Dur Inc A (LALDX) B-||2.05||6.39||1.88||4.47||1.68|
|MTB Short Duration Govt Bond A (ASTTX) B-||1.95||5.61||1.78||3.49||1.44|
|Nationwide Sh Duration Bond A (MCAPX) B||1.83||5.63||1.93||3.25||1.64|
|Performance Fds-Short Trm Fxd Inc A (PFSFX) B||1.92||5.93||2.17||3.24||1.78|
|Vintage Limited Term Bond Fd (AFTRX) A- *||1.84||6.35||2.23||3.94||1.96|
|Wells Fargo Avtg Sh Dur Gov A (MSDAX) B||2.20||6.00||1.73||3.46||1.63|
|AVERAGES FOR ABOVE FUNDS||2.05||6.12||2.06||3.60||1.76|
|* No front-end sales charge.
Source: TheStreet.com Ratings - Data as of 6/30/2007.
For an explanation of our ratings, click here.
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