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We've had the fattest three-year run of profits in stock-market history. Can there be a fourth? There can, of course, although the odds are against it. For example:

What if Southeast Asia's implosion takes more than a modest nip out of U.S. growth?

What if business profits fall, because of worldwide excess production capacity in everything from computers to cars?

What if downsizing gets a second wind (several major corporations recently announced plans to cut their U.S. work forces)?

What if the impending flood of cheap imports from Southeast Asia stirs the hot blood of U.S. protectionism?

The risks on my "what if" list shouldn't drive you out of stocks -- especially since investors keep pouring their wealth into U.S. equities. But they should remind you that smart investors own bonds, too.

Rates on 30-year Treasury bonds fell below 6 percent in December, and when interest rates drop, bond prices rise. Last year's rate drop, from 7 percent to 6 percent, produced gains for bond investors of 18.3 percent.

That's less than the 28.6 percent gain in Standard & Poor's 500-stock average, but bonds carried less risk than the stocks you owned.

Going forward, who knows? The Baltimore mutual-fund company T. Rowe Price checked every fabulous five-year gain in stock prices since 1960. During those fat years, gains averaged 14.6 percent.

But in the subsequent five years, stocks tended to quiet down -- averaging a modest 8.7 percent. During those leaner periods, bonds yielded nearly as much as stocks.

Most of the bond money today is pouring into individual bonds or traditional bond mutual funds. But you'll often find higher yields -- both taxable and tax-exempt -- in closed-end funds.

A closed-end normally raises money only once. It sells a fixed number of shares and invests the proceeds. Then it lists itself on a stock exchange, just like any other public company.

To participate in its investment results, you buy shares through a stockbroker.

Unlike traditional mutual funds, a closed-end has two measures of value: (1) net asset value --what all its investments are currently worth; and (2) market value -- the price that investors are willing to pay to own its shares.

The market price of a closed-end goes up and down independently of what happens to the fund's net asset value.

Typically, a closed-end sells at a discount from net asset value. If its bond investments are worth, say, $11 a share and the fund is selling for only $10, you're buying at a 9 percent discount. That increases your current yield.

As an example, take the AA-quality, tax-exempt Managed Municipal Portfolio, recently selling at a 7 percent discount and yielding 5.8 percent.

That's the same as getting a 9.7 percent taxable return in the top federal bracket -- not obtainable in a high-quality bond today, says George Foot of Newgate, a money-management firm in Greenwich, Conn.

Some closed-ends pump up their yields even further by leveraging your investment -- that is, raising extra money (say, by taking a bank loan) and using it to buy even more bonds.

But winning with closed-ends takes some work. You have to research the fund's average discount and buy only when it's deeper than that. For example, a fund that normally sells at a 7 percent discount may get interesting when the discount goes to 12 percent.

Such a price means the fund is out of favor, perhaps for good reason. But by buying cheap, you're more likely to earn a capital gain. (Occasionally, closed-ends sell for more than their net asset value, which is normally not a good price.)

What can go wrong? Several things:

The fund may own high-rate bonds that the issuer "calls in" (that is, redeems early), forcing your dividend down.

The market for your fund's investments might go sour, driving down the price of your shares. A leveraged fund will drop more than an unleveraged one.

Some closed-ends show high yields by paying out more than they've actually earned -- a deception that's hard for tyros to spot.

Donald Cassidy, a senior research analyst for Lipper Analytical Services, compared closed-ends with traditional funds and found the picture mixed. There's a slight tendency for closed-ends to do better in good years and worse in bad years.

Closed-ends aside, any bond investment will profit from falling inflation and slowing business activity. Maybe that's not happening now. But wise investors diversify, just in case.

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