This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

Safe Funds That Yield a Bit More Than Money Markets

NEW YORK ( TheStreet) -- Since the financial crisis, investors have been fleeing money-market funds. Assets in the funds total $2.6 trillion, down from $3.8 trillion in 2008, according to the Investment Company Institute. Puny interest rates have caused the exodus. According to Crane Data, the average money market yields 0.05%.

Some of the money has flowed to intermediate-term exchange-traded funds. A favorite choice is iShares iBoxx $ Investment Grade Corporate (LQD), which has recorded $7 billion in inflows this year, according to IndexUniverse.com. The iShares fund yields 3.8%, but it comes with certain risks.

The portfolio has a duration of almost eight years. So if interest rates rise by a percentage point in the next year -- as some economists expect -- the fund could lose about 8%.

To get a big bigger yield, consider an ultrashort bond fund. Though they are a bit riskier than money markets, the ultrashort funds can make solid parking places for cash that can be set aside for a year or longer. A top choice is PIMCO Enhanced Short Maturity ETF (MINT), which yields 1.07% and has a duration of 0.98.


To outpace money markets, the PIMCO fund holds some securities with longer maturities. While money-market portfolios must have average maturities of 60 days, the ETF has some securities with maturities of more than five years.

An actively managed portfolio, the PIMCO fund can seek to outdo its benchmark by shifting duration. Recently portfolio manager Jerome Schneider has kept his duration longer than the benchmark figure. PIMCO says the Federal Reserve will continue keeping rates low, reducing the danger that rates might spike.

With rates staying muted, the PIMCO strategy has worked lately. During the past year, the fund returned 2.36%, outdoing the average ultrashort bond fund by a percentage point, according to Morningstar.

Schneider has freedom to range widely, sometimes looking offshore to buy securities from emerging markets and throughout the developed world. The fund has 3% of assets in the emerging markets and 6% in the U.K.

So far shareholders have faced only limited volatility. The ETF began trading in late 2009 with an initial share price of $100.00. In 2010, the price dipped to $99.96 and then began an upward trend. The shares recently traded at $101.49.

1 of 2

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
DOW 17,039.49 +60.36 0.36%
S&P 500 1,992.37 +5.86 0.30%
NASDAQ 4,532.1040 +5.6220 0.12%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs