With more aftershocks of the credit crunch a possibility and a continued global recession enduring, the double benefit of a strong dividend yield plus the backing of the U.S. Treasury make a Treasury bond fund a favorable option.
However, many fear that the huge continuous injections of money to stimulate the economy will ultimately result in persistent inflation, which will likely result in higher interest rates and lower quotes for bonds. That makes an inflation-protected Treasury bond fund like the iShares Lehman TIPS Bond a sensible fixed-income vehicle.
Or Perhaps I should have said,
Psst! Want a hot investment? TIP!
What do you recommend for an inflationary environment?
Recommendation:
TIP: iShares Lehman TIPS Bond
Caveat:
Although Chairman Bernanke will be doing everything in his power to fight deflation, he could fall into the Prohibition Paradox, in that he creates the very thing he is trying to prevent.
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January 9, 2009
Edited: January 19, 2009
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