How can we narrow down the fifteen or so classes of investments that provide high yield incomes? That was our initial objective. At Alpine Strategies, we looked over these classes and noticed a heightened interest in articles on our AboutETFs.com website concerning bonds. It appears many people are more interested than every in US government bonds and T-Bills. Some people are cautiously considering corporate bonds as well. This leads us to another question. Is it time to move most, or all, of your portfolio to US government paper? We do not think so and will explain why.

For ultimate safety of principal, of course, one should indeed stick with treasury bills, notes or bonds. The tradeoff right now is in the yield, or the lack of yield. With current yields on T-bills at .25 percent or lower, we do not see the risk-reward value. What should you do about this dilemma?

We recommend looking at a blended strategy that includes intermediate and short-term investment-grade corporate bonds along with the safer U.S. Government bonds. For those of you who want even more yield, we suggest mixing in a small allocation of lower-grade corporate bonds. Either way, your objective should be to increase income without placing too much of your portfolio in only one asset class.

To further mitigate the risk of default by an issuer on a specific bond, we recommend sticking with bond mutual funds (either open-end or closed-end funds) or examine the selections available in the growing world of exchange-traded funds (ETFs) that are based on indices. There are three bond-oriented ETFs that provide an excellent blend of Treasury, mortgage-backed and corporate bonds. They may provide you just the right blend for a high yield retirement strategy.

* (BND): The Vanguard Total Bond Market ETF

* (LAG): SPDR-Barclays Capital Aggregate Bond Fund

* (AGG): iShares-Barclays Aggregate Bond Fund

Each one of these three ETFs attempts to replicate the Barclays Capital US Aggregate Bond Index, which is diversified into three asset classes:

* 25 percent is represented in investment-grade corporate bonds

* Treasury and Agency bonds (approximately 37 percent)

* 38 percent of the index is comprised of mortgage-backed securities

What about the maturities? Taken as a group, the maturity averages 6.8 years. Nearly 40 percent of the securities mature in less than one year. There are other factors to consider, though. How do these ETFs really compare?

LAG, the State Street ETF, for example, has a lower trading volume than you may wish to consider (31,000 shares) and a relatively small market cap of ten million dollars. Vanguard has a great product in BND, but we end up leaning to AGG with a whopping market cap of $9.7 billion and 800,000 shares trading daily. How did these ETFs fare last year?

All three of these ETFs followed the Barclays index, and all performed quite respectably in 2008. Through a portion of February, 2009, BND, LAG, and AGG dropped by 3.6 percent. As for yields, they are at 4.5 percent for BND, 3.8 percent for LAG and 4.6 percent for AGG.

What about corporate bonds? The only ETF that holds 100-percent investment-grade corporate bonds is the iShares iBoxx $ Investment-Grade Corporate Bond Fund (LQD). LQD follows the price and yield performance of the iBoxx $ Liquid Investment-Grade Index. The index measures the performance of 100 highly liquid, investment-grade, U.S. Dollar-denominated corporate bonds that offer maximum liquidity and represent the broader U.S. corporate bond market. The average duration of bonds held by LQD is 6.25 years, daily trading volume exceeds 800,000 shares and its market cap is $3.7 billion. It may be worth a close look.

To wrap this up, look at blending income selections by way of funds rather than solitary bonds. Examine the advantages of the ETF choices mentioned to enhance your portfolio. Finally, if your risk tolerance allows it, mix in a conservative portion of non investment-grade corporate bonds for even higher potential yields. An important note is to consult all the disclaimer terms on the AboutETFs.com privacy and terms page to understand the scope of risk for buying and selling securities including the possible loss of principal you have invested. Nothing in the article should be construed to mean specific investment advice on only a select grouping of securities may work for investors, they may not be suitable for your needs. Readers should consult with a professional advisor and exercise due diligence before making investment decisions. Chance Carson, his companies, and staff are not making any offers to buy or sell securities in this article.