Investors anxious for income and perceived safety are pouring money into bond funds and out of both cash and stocks (see chart). In the two years ending in June, $480 billion has been added to bond funds. This is almost exactly the amount that flowed into stocks funds in the last two years before the 2000 peak, according to Bloomberg. We think this fact alone should give investors pause. Investors buying funds of longer maturity bonds are taking on more risk than they realize, in our view. We think investors seeking safety of principal should stay close to dash and those needing yield should consider a combination of higher yielding stocks, stocks in companies that are likely to grow their dividends, and higher yielding corporate bonds. This should then be blended with cash and short maturity corporate bonds according to risk and need for liquidity.