Now, however, the wisdom of such recent bond fund purchases is being called into question. While a few still suggest that the biggest threat to our investments and economy may be from deflation - as occurred, beginning in the late 1980s, in Japan, ushering in a more than decade-long severe recession there, with huge losses in stocks and real estate - more analysts believe the hazards ahead for us are from higher interest rates and inflation, conditions in which bond funds usually do very badly. Indeed, already, in just the last several weeks, owners of bond funds have seen significant losses as interest rates, though still low in historical terms, have risen about 1%, approximately 25% higher than only a few months ago.

My brother, Frank, a Raymond James branch manager, has weighed in on this pro vs. con bond funds debate and thinks, with interest rates having been at their lowest level in about forty years, bond fund prices are extremely vulnerable. He's thus been recently advising his clients, even if they only hold short-term bond instruments, to get completely out of all bond funds.

I am not at all skilled as a market timer and so do not feel comfortable forecasting the directions for bonds, equities, real estate, and so on. If you agree, however, that bond funds are currently too risky, or you simply have been safely parking reserves in money market funds, the question arises: where shall excess dollars be put now?

Some like REITs (real estate investment trusts), others convertibles, certificates of deposit, or trust-backed corporates. Each has advantages and disadvantages to be considered. Our main quarrel with REITs at this point, for instance, though they have good yields, is that many have already had a big run-up and are not cheap.

Instead, as was true last year, I now like five actively managed well diversified no-load stock funds with excellent long-term records.

Had you invested a year ago in the five funds recommended here then, (See "Show Me the Money!"), you'd doubtless have done better than with an investment in the Standard and Poors 500 Index. (Per the "Forbes" 9/15/03 issue, for 8/1/02 through 7/31/03, our five mutual fund recommendations averaged a 16.0% total return vs. 10.5% for the Vanguard 500 Index Investor Fund, though with wide performance variations: Heartland Value rose about 45%; Clipper Fund went up only about 3% in that period.)

*The Value as of 7/31/03 of $10,000 invested on 1/31/94, after loads and taxes, per "Forbes," in the 9/15/03 issue, pp. 162-163. (Per the same source, for the S. & P. 500 during 1/31/94-7/31-03, the value of an initial $10,000 investment would have become $24,730, excluding taxes.)

Readers are advised to check out the excellent "Benchmark Investing" site created by Rick Sandberg and Lee Lackey. Here you may find the results of the complicated B.I. calculations provided to you for free. The B.I. Dow Record is also provided. Currently, the most attractive Dow 30 stock, using their Value BI4 approach, which returned 24.6%, compounded annually, for 1973-2002, is Home Depot (HD) (recent price $33.10).

(Disclosure statement: Larry and Val have holdings in some of the suggested assets but do not "make a market" in any of them and do not derive any direct benefit from recommending them, except perhaps for a bit of smug self-satisfaction.)