Even though high yield bonds are very ordinary investments nowadays, this was not always the case. Many investors throughout the 1980s and 1990s associated high yield bonds with investment scandals and deceitful financiers. Today, many investors still favor the relative safety of investment grade bonds like United States Treasurys. But interest rates on all higher quality bonds have been gradually deteriorating for many years. This year, they’re at all time lows, making it very challenging to put together a good fixed income portfolio for retirement. Now may be a good time to reconsider high yield bonds, because it’s among the only areas that offers a decent yield in today’s markets.

Initially, investing in bonds can seem very complicated initially. As a fixed income investor, you’ve got a wide range of possible options. First, you could buy high grade bonds, often issued by governments. Second, you can purchase highly rated corporate debt. This is fairly low risk. As a matter of fact, some corporations are now actually paying lower interest than many sovereign (government) bonds. Finally, you could invest part of your savings in high yield bonds.

It’s possible to purchase individual high yield bonds directly from the corporation that is selling them. But such direct purchases are beyond the reach of most normal investors. The bond market is reigned over by professionals, who spend their days studying company financials and constructing portfolios with maximum returns and the least amount of risk. Luckily for you and me, there are many excellent high yield bond funds and ETFs that you can buy. They’re managed by professional portfolio managers, and provide the great benefit of diversification. For instance, two of the most common high yield bond ETFs (with ticker symbols JNK and HYG) currently have 223 and 446 different bonds in their fund respectively. Likewise for a lot of of the available high yield bond mutual funds: they hold hundreds of individual securities, managing some of the risk of default and price declines. You can go to Morningstar, Yahoo Finance or any other major investment websites and easily find good high yield mutual funds.

You need to be somewhat careful about when to invest in high yield. One approach is to track the so-called interest “spread” between high yield and high grade securities. High yield bonds often yield between four and six percent more than safer bonds. During an economic crisis, this spread rises, as investors flee to the safety of government and other less risky bonds. Corporations selling high yield bonds then have to pay a high rate of interest to get investors to buy their bonds, so the spread may be 6% or more. This is frequently a good time to buy high yield funds. For example, during the global financial crisis in 2008 and 2009, the high yield spread increased to more than 7% over U.S. Treasuries. High yield bonds have appreciated considerably since then.

It’s also advisable to be aware of the fact that high yield bond prices often decline during economic recessions. So in a way, they behave somewhat like stocks. This means potential investment losses.

Don’t allow the bad reputation of high yield bonds stop you from seriously considering these as a source of high current income for your retirement portfolio. But bear in mind that high yield issues are much riskier than many higher grade fixed income securities. With the added yield comes increased risk — there’s no free lunch.

Even though high yield securities are very ordinary investments currently, this was not always so. During previous decades, investors associated high yield bonds with investment scandals and corrupt financiers. Today, many investors still opt for the comparable safety of investment grade bonds like U.S. Treasurys. But interest rates on all higher quality bonds have been steadily declining for many years. Now they’ve reached record lows, which makes it very difficult to put together a good fixed income portfolio for retirement. Now might be a good time to reconsider high yield bonds, because it’s one of the only areas that offers good interest rates in today’s markets.

Initially, investing in fixed income can seem a little overwhelming initially. As a bond investor, you have a numerous possible choices. First, you could buy high quality bonds, often from governments. Second, you could invest in highly rated AAA or similar corporate debt. Doing this would be fairly low risk. In fact, some corporations are now paying lower yields than many government bonds. Finally, you can invest part of your savings in high yield bonds.

It’s not impossible to purchase individual high yield bonds directly from the issuing corporation. But such individual purchases are hardly ever a practical approach for the average investor. The bond market is ruled by institutional players, who spend their days studying company financials and constructing portfolios with maximum returns and minimum volatility. Luckily for you and me, there are many excellent high yield bond funds and ETFs on the market. They’re managed by professional portfolio managers, and offer the necessary benefit of diversification. For instance, two of the most popular high yield bond ETFs (with ticker symbols JNK and HYG) currently hold 223 and 446 different fixed income securities in their fund respectively. The same is true for a lot of of the available high yield bond mutual funds: they hold hundreds of individual securities, mitigating some of the impact of default and capital depreciation. You can check out Morningstar, Yahoo Finance or any other popular investment websites and easily find good high yield mutual funds.

You have to be somewhat mindful about when to invest in high yield. One approach is to track the so-called interest “spread” between high yield and high grade securities. High yield bonds often yield between four and 6 percent more than safer bonds. During economic crises, this spread rises, as investors sell speculative bonds and buy government and other less risky bonds. Corporations selling high yield bonds then have to pay a high rate of interest to get investors to buy their bonds, so the spread may be six percent or sometimes even higher. This is often the best time to purchase high yield funds. For instance, during the global financial meltdown in 2008 and 2009, the high yield spread increased to more than seven percent over U.S. Treasury Bonds. High yield bonds have performed really well since then.

You should also be aware of the fact that high yield bond prices frequently decline during economic recessions. So in a way, they behave like the stock market. This implies potential investment losses.

Don’t allow the bad reputation of high yield bonds prevent you from seriously considering them as a valuable source of income for your investment portfolio. But also bear in mind that high yield bonds are a lot riskier than many higher grade fixed income securities. With the added yield comes increased risk — in investing, there’s no free lunch.

Conceptually, asset allocation is quite simple. Identify a set of diverse investments that don’t always move in lock-step. Determine a risk level that lets you sleep at night, and which is also appropriate based on how many years are left until you retire. Consider the possible asset combinations whose risk is below this level. Compute the theoretical returns for each of these portfolio combinations. Pick the portfolio combination with the optimal risk and return.

The challenge of asset allocation lies in the specific implementation. For instance, what risk level exactly are you comfortable with? How do you even define risk? And even for those scientifically inclined investors who understand the mathematical calculations, a theoretical understanding of potential risks is not at all the same as experiencing the real deal, as any veteran investor who’s lived through a few economic recessions will tell you. Your basic survival instincts are your worst enemy, and fight you at the worst possible decision points.

Asset allocation for TSP participants boils down to making a selection of the 5 available TSP funds, or allocating your entire account to one of the pre-determined asset mixes, the Lifecycle or “L” Funds. The latter option is convenient for those who don’t understand the specifics, but as in other important life decisions, the simplest choice is not always the most beneficial.

The 5 TSP funds cover two asset classes: fixed income and equities. The lowest risk is the G Fund which holds a fixed income security that is backed by the US government not to lose any of your original investment. Its most likely gains are therefore also the lowest. The other bond choice is the F Fund, which follows an index of high grade corporate and government bonds. These two bond funds are invested in US securities only. The other 3 funds are stock funds. The C Fund is held in an index consisting of large USA equities. The S Fund is held in a broad index consisting of small USA equities. And the I Fund invests in foreign equities in developed markets. Diversify among these funds and you’ll have a robust equity and bond investment portfolio.

A savvy investor shouldn’t stop there. As you approach retirement, you’ll probably very well open more savings accounts in addition to your TSP account. After you’ve maxed out the annual contribution, if you still have additional savings, you can contribute these to a regular investment account. Another common scenario may be that you have a working spouse who is not a U.S. government employee. Feds who encounter this situation frequently ask: what do I invest the additional money in? Once you go beyond the five TSP funds, the situation gets a little more involved.

With your basic U.S. stock/bond portfolio in place, you may want to allocate some part of it to emerging markets equities, for additional diversification. One well-chosen additional index fund will do the job. A good option is Vanguard MSCI Emerging Markets ETF.

Next you could add real estate, which also has historically proven to have low correlation to other asset classes. The simplest addition you can make here is to add one good Real Estate Investment Trust (REIT), such as the iShares Cohen & Steers Realty Majors (ICF).

Next, let’s take a look at alternative investments such as commodities. This is an asset class that’s often overlooked. The simplest approach to investing in commodities is by buying an exchange traded fund (ETF) that invests in them. ETFs trade very much like stock shares, and you can place an order to buy and sell them through any broker. For most TSP investors the most suitable commodity ETF is one that follows a broad index. One example of a commodity index fund is the iPath Dow Jones UBS Commodity Index ETN (DJP), but others exist which follow different indexes. For investors with larger portfolios, a small allocation to more specific commodities could make sense. For instance, to benefit from increasing gold prices, you can invest in the iShares COMEX Gold Trust (IAU). Or to follow the price of crude oil, try the United States Oil Fund (USO).

As always, diversify, and don’t allocate too much of your retirement savings into any one asset class.

Throughout the 1980s and 1990s, investors associated high yield bond funds with investment scandals and dishonest financiers. Today, many investors still favor the relative security of investment grade bonds like United States Treasurys. But interest rates on all high grade bonds have been steadily deteriorating for decades. In 2012, they’re at all time lows, making it very challenging to put together a good bond portfolio for retirement. Now may be a good time to reevaluate high yield bonds, because it’s one of the only areas that offers good interest rates in today’s markets.

As a bond investor, you’ve got a wide range of possible options. First, you could buy high quality bonds, often issued by governments. Second, you can invest in highly rated AAA or similar corporate debt. This is still relatively low risk. As a matter of fact, some corporations are now actually paying lower interest rates than many government bonds. Finally, you can invest some of your money in high yield bonds.

Investing directly in individual high yield bonds is not a practical approach for most individual investors. The bond market is reigned over by institutional players, who spend their days pouring over company financials and assembling portfolios of the highest possible returns and the lowest volatility. Luckily for you and me, there are many excellent high yield bond funds and ETFs available. These are managed by professional portfolio managers, and provide the necessary benefit of diversification. For example, two of the most common high yield bond ETFs (with ticker symbols JNK and HYG) currently have 223 and 446 different bonds in their fund respectively. Likewise for a lot of of the available high yield bond mutual funds: they hold a large selection of individual securities, limiting some of the impact of default and price declines. You can visit Morningstar, Yahoo Finance or other popular investment websites and easily find good high yield mutual funds.

You need to be a little mindful about when to invest in high yield. One strategy is to keep an eye on the so-called interest “spread” between high yield and high grade securities. High yield bonds usually yield between 4 and six percent more than bonds that are considered less risky. During economic crises, this spread rises, as investors flee to the safety of government as well as other less risky bonds. High yield issuers then must pay a high interest rate to get investors to buy their bonds, so the interest rate difference may be 6% or more. This is often a good time to buy high yield funds. For instance, during the global financial crisis in 2008 and 2009, the high yield spread increased to upwards of seven percent over United States Treasurys. High yield bonds have appreciated considerably since that time.

It’s also advisable to know that high yield bond prices typically go down during economic recessions. So in a way, they behave like stocks. This means potential investment losses.

Don’t let the bad reputation of high yield bond funds stop you from seriously considering them as a source of high current income for your retirement portfolio. But bear in mind that high yield issues are a lot riskier than many higher grade fixed income securities. With the added yield comes increased risk — in investing, there’s no free lunch.

During the 1980s and 1990s, high yield bonds evoked thoughts of investment scandals and unscrupulous financiers, who were depicted in newspapers and on TV as “junk bond kings.” Many investors still favor the relative safety of investment grade bonds like U.S. Treasurys. But interest rates on all higher quality bonds have been gradually deteriorating for decades. Now they’ve reached all time lows, which makes it very hard to put together a good fixed income portfolio for retirement. Now might be a good time to reconsider high yield bonds, because it’s among the only areas that has good interest rates in today’s markets.

As a bond investor, you’ve got a numerous possible choices. First, you could buy high quality bonds, often issued by federal or state governments. Second, you could buy highly rated corporate debt. Doing this would be still relatively low risk. In fact, some corporations are currently paying lower interest than many government bonds. Finally, you can invest some of your money in high yield bonds.

Purchasing individual high yield bonds is not a practical approach for most individual investors. The bond market is dominated by institutional players, who spend their days looking over company financials and putting together portfolios with maximum returns and the least amount of risk. Luckily for you and me, there are many excellent high yield bond funds and ETFs that you can buy. These are managed by professional portfolio managers, and provide the great benefit of diversification. For instance, two of the most widely used high yield bond ETFs (with ticker symbols JNK and HYG) currently hold 223 and 446 different bonds within their portfolios respectively. The same is true for many of the available high yield bond mutual funds: they hold a large selection of individual securities, managing some of the impact of default and investment losses. You can go to Morningstar, Yahoo Finance or other major investment websites and easily find good high yield mutual funds.

You need to be a little careful about when to invest in high yield. One strategy is to keep an eye on the so-called interest “spread” between high yield and high grade securities. High yield bonds often yield between four and six percent more than safer bonds. During an economic crisis, this spread rises, as investors sell speculative bonds and buy government as well as other less risky bonds. High yield issuers then have to pay a high rate of interest to get investors to buy their bonds, so the interest rate difference may be 6% or sometimes even higher. This is often a good time to purchase high yield funds. For example, during the global financial crisis in 2008 and 2009, the high yield spread rose to more than seven percent over U.S. Treasuries. And high yield bonds have performed really well since that time.

You should also know that high yield bond prices usually decline during economic recessions. So in a way, they behave somewhat like stocks. This implies potential investment losses.

Don’t allow the bad reputation of high yield bonds stop you from seriously considering them as a valuable source of income for your retirement portfolio. But also be aware that high yield bonds are a lot riskier than many higher grade fixed income securities. With the added yield comes increased risk — there’s no free lunch.

Whether one is living in difficult or robust economic times, it is always important to have an investment strategy that includes relatively safe investments. One form of investment is known as Fixed Income Investments.

Fixed income investment refers to any type of investment that generates an average return. Investors loan their money to a government body, corporation, or financial institution and receive interest on a regular basis. Although the rate of return may not be high, there is comfort knowing the risk is minimal. If a person is seeking to invest their money where there is not a high risk, fixed income investments are usually the solution.

The term fixed-income investment include such investments as bank notes, mutual funds, mortgage backed securities, retirement investments such as GICs, T-Bills, as well as government and corporate bonds, and other forms of securities. While the principal and return are not fail-safe, these fixed-income funds offer the chance for a higher return. They are popular for those planning on retiring in the near future.

GICs are a popular choice as a fixed income investment. The interest and principal are insured to a certain degree so your money is for the most part protected. Fixed-income mutual funds are a good choice for wary investors as they provide the opportunity to predict income over a set period of time. This is handy for budgeting purposes, so people can plan for retirement.

Many prudent investors acquire bonds as a fixed income investment. They generally pay out twice a year or on a monthly basis. Bonds are a tax-free investment income. Such bonds can be federal, state, or local municipality bonds.

Certificates of Deposit allow people to earn interest on their investment without any real risk of loss. It is much like putting money in an insured bank investment for a fixed period of time. It will earn a preset interest rate for a fixed time period. After the time expires, the certificate matures and the investor can cash in the certificate. They will receive their initial investment plus any interest earned.

Savings Bonds pay a fixed interest rate that is delayed until the bond is redeemed or for 30 years. The rate is based on the interest rate at the time of purchase. The interest paid is adjusted for inflation.

If you are about to retire and are in need of an investment with low risk, fixed income solutions can be the right choice. Investment portfolios will benefit by having a safe and secure stock. By combining investments that are affected differently by economic events, investment risk is reduced. These investments are often chosen during periods of market instability. Fixed investments can fluctuate with market conditions. If you have to sell them prior to maturity, you will usually receive a penalty fee.

Fixed Income Investments are a sound choice for cautious investors and those seeking a safe investment for retirement. Most fixed-income investments also provide a foreseeable flow of income. This can be an advantage for those on a pension or social security.

Spending years on the trading floor gave me an advantage to know how are the real players out there. With so many stock brokers, it’s hard for the average person to figure out which is the best but you are in luck because I’m here.

Zecco is ultra cheap but it’s one of the worst stock brokers out there. At the beginning, they were advertising free stock trades. Then, they changed it to 10 trades per month only. Afterward, they switched it to 10 trades per month only if you have $25,000 in your account. What gives?

OptionsHouse’s pricing is only $2.95 per trade. Yup. Less than three dollars. I know. It’s cheap, and their competitors know this. It will be interesting to see how everyone else response once the word is out.

TradeKing, while not the lowest price broker anymore, is still very good. It keeps winning awards like the Smart Money best discount broker award and others, all while maintaining their good pricing and awesome customer service.

OptionsXpress trouts itself as the best options broker and it certainly has great options trading tools. Price wise, it’s not the cheapest but if you are looking for good education and great trading tools, look no further.

Scottrade is not really promoting its business like it should but it does offer a solid platform for traders. At $7 a trade, it is middle of the pack in terms of price and middle of the pack in terms of features.

TD Ameritrade really needs to update their interface, as well as lower their pricing. The price is high, not to mention that the website have been known to be down under heavy use.

Etrade used to be the most innovative and web savvy company but with all the troubles and all these up and coming discount brokerages, Etrade has a tough road ahead. Still, this firm has a solid offering if you don’t mind paying a little bit more per trade.

Many mistakes, many years later and stand before you is a man who knows about stock brokers. I’ve almost tried them all so I can quickly tell whether the interface is good or not, without making a single trade. Here’s what I think about the different brokers.

Zecco still advertises stock trading at no cost, but the package it offers is a far cry from the unlimited free trades that it used to promote. Nonetheless, 10 free trades per month (for those that qualify) is still quite good.

OptionsHouse was a no-name until it made headlines with $2.95 per trade. Before that, they were offering $4.95 a trade without anyone ever signing up. Now that they’ve lowered the price, people are signing up in droves. Will it last?

TradeKing was one of the first stock brokers who invented the area of discount brokerage firms. It’s good customer support, fair pricing and good tools ranks high in my book of stock brokers.

As the name implies, OptionsXpress is all about options. While it has stock trading offers, options trading is where it really shines. It even has an extensive guide to options trading, which is good for beginners as well as professionals.

Scottrade is not really promoting its business like it should but it does offer a solid platform for traders. At $7 a trade, it is middle of the pack in terms of price and middle of the pack in terms of features.

TD Ameritrade has good person support because you can walk into a branch and talk to someone. However, its website is lacking and looks like something from the 80s. I wouldn’t touch it with a ten foot pole but you may like it.

Etrade used to be the most innovative and web savvy company but with all the troubles and all these up and coming discount brokerages, Etrade has a tough road ahead. Still, this firm has a solid offering if you don’t mind paying a little bit more per trade.

Many mistakes, many years later and stand before you is a man who knows about stock brokers. I’ve almost tried them all so I can quickly tell whether the interface is good or not, without making a single trade. Here’s what I think about the different brokers.

Zecco stomped onto the industry with unlimited free trades. It was a big mistake because it was an unsustainable business model. Now, it only offers ten free trades if you have $25,000 in your account.

OptionsHouse’s pricing is only $2.95 per trade. Yup. Less than three dollars. I know. It’s cheap, and their competitors know this. It will be interesting to see how everyone else response once the word is out.

TradeKing was one of the first stock brokers who invented the area of discount brokerage firms. It’s good customer support, fair pricing and good tools ranks high in my book of stock brokers.

As the name implies, OptionsXpress is all about options. While it has stock trading offers, options trading is where it really shines. It even has an extensive guide to options trading, which is good for beginners as well as professionals.

Scottrade was one of the oldies and I have a tough time spelling this stock broker correctly. Anyway, it offers $7 a trade and is probably good for you if you like the old style trading platforms. Otherwise, stick with the others.

TD Ameritrade has good person support because you can walk into a branch and talk to someone. However, its website is lacking and looks like something from the 80s. I wouldn’t touch it with a ten foot pole but you may like it.

Etrade used to be the most innovative and web savvy company but with all the troubles and all these up and coming discount brokerages, Etrade has a tough road ahead. Still, this firm has a solid offering if you don’t mind paying a little bit more per trade.