Q. I retired in the spring of 2000 and my financial products salesman sold me on predominantly equities. After some painful losses, I want to diversify into some fixed income investments--- as we should have done in 2000. I've asked him about Vanguard Total Bond Market, TIPS, ETFS and some other things and he is fighting me all the way.

It does look like a bad time to move into fixed income. Are there some good choices out there for someone who is selling stock mutual funds at a loss? I am 61 and have about $600,000 left.

---R.B., by e-mail


A. There are some very basic things you need to understand. First, your "financial products salesman" can't make a living by selling you no-load funds, government Treasury Inflation Protected Securities, or even Exchange Traded Funds with small brokerage commissions. Unless your salesperson is well established and has a big book of business--- a large and happy list of existing clients---the only way he can pay his rent is to sell financial products with relatively large front-end commissions. Salespeople can't work for free. And, trust me, their office manager will be on their case if they start building ETF portfolios rather than selling the high commission "preferred" funds.

So you've got a choice to make.

You can (1) learn enough to make your own investment decisions or you can (2) start a search for a financial professional who will put your interest first. Both can be daunting projects.   I think brokers who sell funds from the American funds group are following a good path for a constructive broker/client relationship. These funds have a hefty front-end commission. It pays the brokers' bills. But they also have low annual expense ratios. Many of their funds have impressive track records.

American Funds Balanced Fund A shares, for instance, has an annual expense ratio of only 0.67 percent. It has performed in the top 10 percent of competing balanced funds for the last 3, 5, 10, 15, and 20 years. That's one stop shopping with a 20 year annualized return of 12.71 percent, only 0.76 percent less than the return of the all equity S&P 500 Index.

One way to reduce the risk of fixed income markets as a self-directed investor is to build a ladder of individual fixed income securities. You build a ladder by buying securities that mature at different times. A simple ladder would be composed of five securities. One would mature in one year, another in two years, and so on.

Each year you replace the maturing security with a new five-year security. You can do this on your own with Treasury securities. Complete your portfolio with a broad equity purchase, such as the Vanguard Total Market Vipers ETF (ticker: VTI).


Q. As an innocent favor, my wife co-signed on a mortgage with her brother eight years ago. His habitual late-pays have damaged her credit severely since. We are trying to extract ourselves from this situation and move on with our lives. The remaining balance is about $50,000 and scheduled to be paid off in the next 48 months. Is there any way out?

Regardless of your advice, I'll caution readers to tread carefully when it comes to putting personal credit at stake for the benefit of another.

---T.A., by e-mail


A. What you said is a lot more important than anything I can add. (It's also further proof that no good deed goes unpunished!)

Your credit is your credit is your credit. The process of restoring your credit rating, once it has tanked, is long and tedious. If you are tempted to help someone and can afford it, give him money. Never tie your future credit to their future actions.

The best action, if it can be done, is to get the brother-in-law to refinance without co-signing. That's a very unlikely event. If it could be done, however, it would end your "contingent liability" and start the clock for improving your credit record.