So Albert Einstein arrives in heaven where he meets a man with an IQ of 160. “Wonderful,” Mr. Einstein says. “We can talk physics.” Next he meets a man with an IQ of 110. “Great,” he says. “We can talk literature.” Finally, he meets a man with an IQ of 80. “So,” the great man asks, “Where do you think interest rates are headed?”

        As the old joke implies, interest rates are almost impossible to predict. But you don't need to be a genius to figure out which funds offer the best yields given the amount of risk they take. Right now, the screening process points us to intermediate-term corporate bond funds.

        Many savers are looking for higher yields, and with good reason. Money funds returned 2.1 percent through May, not even keeping pace with inflation. Don't look for them to gain the upper hand soon.

        They now yield an average 3.41 percent, iMoney.net, which tracks the funds, says. Inflation rose at a 4 percent annualized rate the first five months of the year because of soaring energy prices. Economists say the core inflation rate, which excludes the volatile food and energy sectors, is a better inflation measure. It ran at 2.9 percent. But people who live on savings don't exclude food or energy from their budget.

        So if you want your money to grow after inflation, you have to earn a higher return. One way is to move up the yield curve — a term that needs explanation.

        Bonds are long-term IOUs. When you buy a bond, you're a lender. Lenders demand higher interest for long-term loans than short ones. Why? Long-term loans are riskier than short-term ones.

        Suppose your friend asked for a $100 loan. You wouldn't think twice if he promised to repay the loan Tuesday. Now suppose he offered to pay it back in July 2031. You'd lose the use of that $100 for 30 years. You could also lose track of your friend.

        So long-term bonds usually yield more than short-term ones. Consider U.S. Treasury securities, which come in maturities ranging from three months to 30 years. Here's a glance at Treasury yields on Thursday:

        • Three-month T-bill: 3.58 percent.

        • Two-year T-note: 4.02 percent.

        • Five-year T-note: 4.74 percent.

        • 10-year T-note: 5.23 percent.

        • 30-year T-bond: 5.64 percent.

        Were you to graph these figures, you'd get a curve that sloped sharply at first, and then tapered off. That's why it's called the yield curve.

        Money market funds invest in the shortest-term part of the yield curve — typically, in the three- to six-month area. The average taxable money fund now yields 3.41 percent. You can normally earn more interest by investing farther out on the yield curve.

        With that higher interest comes more risk. The federal government guarantees Treasury securities, so you don't have to worry that the issuer will go bankrupt. You do have to worry that you are locking in an interest rate for a long time. After all, inflation could keep rising. Or rates could rise, leaving you stuck with a low-paying bond.

        You get the most increase in yield by moving from short-term bonds to bonds that mature in three to five years. For example, you pick up almost 1.25 percentage points by moving from a three-month T-bill to a five-year T-note. You gain less than a percentage point by moving out 25 years, from a five-year T-note to 30-year T-bond.

        A simple way to gain more yield would be to move from a money market mutual fund to a five-year Treasury bill. You can buy Treasuries through your broker, who will charge a fee, or through the government's Treasury Direct program, which is free. You can find more details about Treasury Direct at www.publicdebt.treas.gov.

        Another solution is a mutual fund that invests in bonds that mature in five years or less. You can add about 1.5 percentage points above comparable Treasuries by investing in high-quality corporate bonds.

        It's not that high quality-bonds are extremely risky. General Electric, Procter & Gamble and Ford are likely to be around for a long time. But the government is issuing fewer Treasury securities now, which drives Treasury yields down.

        If you want a diversified portfolio, the best bet is an intermediate-term bond fund.

Comair to again reach 97 cities
A heck of a deck
FedEx wants to halt DHL's Mexico permit
Sysborne acquires bankrupt InfiNET
401(k): Don't look for quick fix
HIGGINS: Personal Finance
Savvy Strategies
The Sophisticated Investor
Harley-Davidson revs up for new-generation rider
Honeywell CEO streamlines procedures
Individual Investor magazine shuts down
Rate report
Small economic rebound expected
Two design-engineering firms will become one
Business Digest
What's the Buzz?