I'm tweaking my portfolio in preparation for my retirement, which will be in four years or so, and I have a couple of questions.

How do short-term corporate bond funds perform in periods of (1) raising interest rates, and (2) inflation?

The reason that I asking this question is that I have about 3% of my portfolio in a short-term corporate bond fund. (It's in an IRA). I am thinking about switching it to a REIT, to try to give me a hedge against inflation. I would continue to dollar cost average into it, so as to get it to about 5% of the total portfolio. 

The bond side of my 60/40 portfolio looks like this:

 Total Bond Market 11%

 Munis 7%

 TIPS  6%

 Short-term treasuries 4%

Short-term corporates 3%

Cash 10%

 Any help on this will be greatly appreciated. Thanks.

Expect your short term bond fund to keep up with inflation and little else. [In my opinion, this is an excellent outcome considering general market prospects over the next 5+ years. (I have nothing special to say about the next year or two)]

REITS do keep up with inflation BUT...

housing is being hit hard by the subprime crisis. This will hit REITS as well. Also, many investors consider REITS to be fully priced already.

Have fun.

John Walter Russell 

IMO about one's bond allocatons? Good Luck! It's a complex game and nobody, not even the great Bill Gross of Pimoco knows.. Every type has it's pro's and cons and Ups and downs.. and It all depends on what your Tax situation is and a list of 5 other issues before even attempting to figure out what "might" be best for you and it's still a guessing game and ask everyone else and they will have different approaches. and this is way beyond Investment Basics...

I would go to > M*Retirement Discussion Board and ask them in there.

People like Bob Brinker's 50/50 port #3 advocates

20%VFIIX,10%VIPSX and 20%VFSTX

A Fixed Income Port of

40% VFIIX, 35% VFSTX, 10% VIPSX and 15% VWEHX

While I own Balanced Funds and LSBRX and reserves in VBIIX and don't auto invest Divs & CG's, but do so myself, after I pay the taxes and Take out what I think I will need..

Good luck!