Q: In a recent column, you discussed the advantages of buying direct Ginnie Mae securities. However, I can't find any information on how or where they can be purchased. -- John, Oceanside

A: Buying in mortgage-backed securities such as those offered by the Government National Mortgage Association is easy and inexpensive. But you need to do some homework before investing.

A Ginnie Mae is a pool of 30-year mortgages offered to investors with a minimum of $25,000. Basically a bond, they currently yield about 5.5 percent, and the value will fluctuate as interest rates go up and down. However, you will receive a full return of your investment as the mortgages pay down principal, refinance loans, or pay off the mortgage entirely.

Some investors are attracted to a Ginnie Mae because they are backed by the full faith and credit of the U.S. government. That means that every loan in the pool could default and you would still be paid interest and principal. The only other securities to receive this absolute guarantee are U.S. Treasury bills, notes and bonds.

However, unlike Treasuries, you cannot buy a Ginnie Mae directly from the government. You have to go through an underwriter such as a brokerage firm. As an investor, you do not pay a commission on a new issue and there are no annual management fees. If you invest $25,000, you will ultimately get all of your money back over the term of the investment.

Brokers do get paid a fee by Ginnie Mae for handling the transaction. But the amount is much less than they would get if they sold you a mutual fund that invests in these securities. So be prepared for some serious pressure to convince you that the fund is the better way to go.

Funds are an option for a person who doesn't have $25,000 to invest in a direct Ginnie Mae. Most funds will let you in with just $5,000. And they do allow for the reinvestment of interest and principal distributions. However, those modest benefits fail to justify a sales charge of 4 percent or more and annual management fees of around 1 percent.

And Ginnie Mae mutual funds do not provide the same guaranteed return of principal as does a direct purchase. Mutual funds are eternal investments with no maturity. A big spike in interest rates would erode the share value.

George Chamberlin is a regular contributor to the North County Times and also is a TV and radio commentator. Send your investment questions to geoc@cox.net.