Expert: Doug Ingram - 3/10/2005

Question
As I near retirement (5-10 years away), I'm considering opening and slowly adding to a ginnie mae fund. My expectation is that over this kind of time horizon, the fund would be a reasonably safe investment, outperforming money markets without the level of risk I would encounter in a stock fund.  I would be happy to achieve an annualized 3-7% return over this time period.  Do you think this is a reasonable course or do you have an alternative suggestion?
Thank you.

Answer
It's a good strategy as outlined.
You won't have the upside of stocks, but there's also that DOWNSIDE that you have to deal with equities.
For safety, you would one of the highest returns of the safest bonds (GNMA are guaranteed by the U.S.).
Although it depends on the kind of money involved, maybe some high-quality munis (tax-free) debt would be a good addition.

Even for a conservative approach, you might want 50% GNMA fund, 30% munis, and 20% of a VERY-WELL managed stock fund.

morningstar.com might help you weed out your options.