Bond investors need to think like lenders, because their money needs to be productive, said Bill Larkin, portfolio manager at Cabot Money Management.
In a money market right now, investors are only earning about $10 to $20 a year on a $100,000 investment, and "that's just not enough to meet anybody's investment objective," Larkin said.
Instead, Larkin offered five alternative strategies for bond investors to increase their returns:
- Move from money markets to short-term bonds of about three to seven years.
- Put money in three-year Treasury bills, which earn 10 times as much as a three-month Treasury bill. Also, two-year Treasurys will earn about $950 a year on a $100,000 investment.
- Buy US-backed agency bonds.
- Purchase investment-grade corporate bonds, such as General Electric , CVS , Hewlett-Packard and Hess .
- Invest in an exchange-traded fund. They are very diversified and transparent, they pay monthly and are liquid daily.
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Disclosure information was not available for Larkin or his company.