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Six Bond Funds With Consistent 'Real' Returns

With a total return of 0.36% in 2008, the Colorado Bond Shares Tax-Exempt Fund (HICOX) deserves 12 cheers.

While the fund's fractional gain might not seem impressive at first glance, it was higher than the 2008 inflation rate of 0.1% the government announced Friday. By besting the CPI, HICOX was able to produce a positive "real" annual return for its holders. Its return in 2007 also surpassed the gain in the consumer price index, as it did in the previous year, and the year before that, and again and again and again.

In fact, the double-tax-exempt HICOX turns out to be the only fixed-income fund in TheStreet.com Ratings' database to have achieved 12 consecutive annual returns, besting the corresponding gains in the CPI. Its singular achievement is summarized in the table below.

An investor in search of a bond fund consistently producing gains exceeding the annual inflation rate will find that the quest is anything but a slam dunk. It turns out that even with supposedly steady fixed-income funds, lengthy annual strings of positive "real" returns are surprisingly elusive.

FIXED-INCOME 'REAL RETURN' CHAMP: 12 STRAIGHT YEARS OF BEATING THE CPI
NAME
Colorado Bond Shares
Tax-Exempt A
CONSUMER PRICE
INDEX
TICKER
HICOX
-
INVESTMENT OBJECTIVE
Municipal - Single State
-
TheStreet.com RATINGS GRADE
C+
-
TOTAL NET ASSETS ($MIL)
741.2
-
TOTAL EXPENSE RATIO (%)
0.61
-
MIN. INITIAL INVESTM'T ($)
500
-
MAX. INIT. SALES CHG. (%)
4.75
-
YIELD (%)
5.096
-
CALENDAR YEAR TOTAL RETURNS (%)
2008
0.36
0.1
2007
5.29
4.1
2006
5.50
2.5
2005
5.85
3.4
2004
5.33
3.3
2003
6.56
1.9
2002
6.03
2.4
2001
7.26
1.6
2000
7.68
3.4
1999
3.20
2.7
1998
6.35
1.6
1997
9.49
1.7
Source: TheStreet.com Ratings (Data as of 12/31/2008)"
For an explanation of our ratings, click here."

While the remarkable HICOX has outpaced inflation over each of the past dozen years, a parsing of the thousands of bond funds in TheStreet.com Ratings' database could not find one other that has performed the same trick for even the past 10 years. But that could change by the end of this year, as the five funds in the second accompanying table have now strung up nine straight years of gains exceeding inflation's annual erosion of purchasing power.
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