The markets don’t get any tougher than the last few weeks. Nothing seems to be working, except for the toughest of the tough- bonds.

While we have been getting roughed up to the tune of almost a 50% drop in the stock indices, corporate bonds have been as solid as stone, with a few exceptions.

Right now, you can earn as much as 15-17% per year on investment grade corporate bonds with very short maturities. So why are we taking risks in the stock market and getting killed?

Simple, most people know less about bonds than any other investment. Too many moving parts, too many new terms to understand, so they stay within their comfort zone.

Yield to maturity, current yield, yield to call, mandatory calls, sinking funds, coupon, treasury spreads, accrued interest, it’s enough to drive anyone mad. Just when you thought you had stocks mastered.

Here is an idea that will help get you out of the line of fire of the stock market and into a safer, saner investment that will beat the stock market’s long-term return. I can’t explain it any simpler.

Alcoa has a bond that is really cheap right now. All bonds are offered at $1000 each, or there about, and all mature at $1000, but you can buy them on the secondary market cheaper if the business has a slow down, as Alcoa has.

You can buy this particular bond for about $830, which means you get a capital gain at maturity of $170 in addition to the interest it pays which is 6.5%.

The bond matures in June 1, 2011, that’s a holding time of 27 months. That’s considered an ultra short maturity. On June 1, 2011, you will receive your last interest payment of $32.50 and $1000 at maturity, even though you only paid $830 for the bond.

Here’s how to figure your annual return. Most people really have trouble with this part of bonds.

You will receive interest payments on or about June 1, 2009 and 2010, and on January 1, 2009, 2010, and 2011. That’s five interest payments of $32.50 (half of 6.5% annually or $65.00/2).

You get $162.50 in interest and capital gains of $170 at maturity, for a total of $332.50 for an $830 investment.

You have something called accrued interest, which deducts about $10 from your total. Don’t ask, it’s one of those bond things that I don’t have time to explain, which leaves you with $322.50.

You divide your total of $322.50 by your purchase price of $830. Your total return for a 27-month hold is 38.85%.

To get your annual return divide your total return, 38.85% by 27, the number of months you held it, for .014, and multiply that by 12, because there are twelve months in a year, or 17.2% per year.

Alcoa is an investment grade bond, not a junk bond. Investment grade bonds, according to Moody’s records, have a 99% success ratio for an 80-year period. That means they pay off 99% of the time.

Many investment grade bonds will pay you this much per year and more. The question you should be asking yourself is, “why am I getting killed in the stock market when I could be doing this?”

A return of 15% per year and a 99% success ratio for an 80-year period. Think about it and take a look at the Bond Trader. We do this every week.

Source: A Safe 15% Per Year, No Sweat