A reader takes issue with using bond funds as a ‘safe’ and ‘easy’ way to invest in fixed income
Got a question about Series I bonds or other fixed-income investing, how it fits into your overall financial plan and what strategies can help you make the most out of your money? You can write me at [email protected]. Bond funds are the devil in disguise. Why do I say this? Because individual investors are drawn to bond mutual funds for three main reasons: instant diversification, professional management and in-and-out liquidity.
The fund investor often panics. We can see their emotional response to volatility in fund outflows. All of us have an innate tendency to interpret large temporary declines in the market as the beginning of the end. And when we panic, we flee. We sell at the wrong time and incur that permanent loss of capital. There is rarely a reason to sell a quality bond at a loss.JWYou bring up a good point, so thanks for writing.
Figuring out what kind of bond fund to buy is a little trickier than just buying a broad market equities fund, like one that tracks the S&P 500 SPX. That’s because, as you point out, bonds do not behave the same way as stocks, and bond funds don’t perform the same way as stock index funds. Not everyone agrees that investing in a bond fund is just a bet on interest rates because of the yield involved.
“You want to own a core bond-fund profile, and if we’re talking in duration, that would be a three- to seven-year term,” says Akullian. Akullian says this is where she sees most of the ire aimed at bond funds. “A lot of people have had a bad experience in bond funds, and a lot of that comes from bond mutual funds — getting capital gains and having to pay taxes,” she says.
Series I Bonds Fixed-Income Investing Financial Plan Strategies Money Bond Mutual Funds Diversification Professional Management Liquidity
Australia Latest News, Australia Headlines
Similar News:You can also read news stories similar to this one that we have collected from other news sources.
Treasury’s $24 billion 30-year bond auction goes poorly, trader saysVivien Lou Chen is a Markets Reporter for MarketWatch. You can follow her on Twitter vivienlouchen.
Read more »
GBP/USD falters on mixed BoE signals, higher US bond yieldsThe British Pound (GBP) extended its losses against the US Dollar (USD), and for the fourth straight day, fell 0.25% after the pair hit a daily high of 1.2308.
Read more »
30-Year Treasury Auction Breaks Bad, Sinks Stock MarketLack of demand send bond yields high.
Read more »
Wynn Resorts and Illumina Stocks Drop in Extended TradingAll three indexes slid during Thursday's trading as bond yields spiked during the session.
Read more »
Stock Prices Fall on Bond Market PressureLos precios de las acciones en la Bolsa de Valores de Nueva York cayeron el jueves, con lo que llegó a su fin una de sus rachas de ganancias más largas en dos décadas luego de que la presión se elevó en el mercado de bonos.
Read more »