When it comes to investing and economics, the world has changed so drastically that what was taken to be the norm just a few months ago is no longer valid.

October's top-performing bond funds bear that out.

The best-performing fund, the

Comstock Strategy Fund

(CPFAX)

, is not a fund at all but a single bet on one particular government bond. Seventy-six percent of its assets are invested in one issue. Extreme circumstances require extreme measures, so it's understandable that strategies such as this are employed. With a monthly return of 29.7%, who could argue otherwise?

However, a note of caution for those invested in government bonds: The effect of the $700 billion bailout, which will require the government to issue new debt, is yet to be felt and may result in certain maturities taking a beating. It is likely that 10-year bonds will be dragged down as the government issues more and more debt. With the Federal Reserve on track to slash the fed funds rate to below 1% or even to 0% (a la Japanese style), this is more than likely to support government debt with maturities of one to two years. So the yield curve will steepen, with prices on shorter-date maturities rising (and yields falling) and prices on longer-date maturities falling (with yields rising). It looks like CPFAX is in the right place in short maturity bonds.

Other funds with very different strategies than the ones suggested in their names include:

The Rydex Series Inverse Government Long Bond Strategy Fund

(RYJUX) - Get Report

, which is 70% cash. Not long ago, funds were allowed a maximum of 5% deployed in cash. Now it appears that cash is considered a valuable asset and a genuine part of any investment strategy, which it should have been all along.

The Direxion High Yield Bear Fund

(PHBRX)

seeks to profit from a decline in the value of lower-quality debt instruments by creating short positions and using derivatives of such instruments. This fund has 97% of its assets in just one security. Not much diversification there.

So what we have is a removal of "old" ideas from asset management, with diversification the central tenant, and the ushering in of a period where very specific securities are being purchased or large cash holdings are considered acceptable strategies. Vastly different from what was being touted a few months ago.

Sam Patel, CFA, is the manager of mutual fund research for the TheStreet.com Ratings.

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