Mar 9, 2008

Michael S. Rozeff on reaching for yield

Investors who over-reached for yield and over-reached for yield spreads are learning the hard way that this was a risky policy. When yields on short-term money market funds fell drastically, the number of ultra-short bond funds doubled. These bring in extra current yield by, among other things, investing in mortgage and other asset-backed securities. Although they seem like money-market funds, they are not. A fund like Fidelity’s Ultra-Short Bond Fund maintained a $10 value for over 4 years, only suddenly to drop to $8.61.

~ Michael S. Rozeff, "Let the Bankruptcies Roll,", March 8, 2008

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