Bond Funds Might be Hazardous to Your Wealth
For more than 35 years, since interest rates topped out in 1980 (money market funds paid 18%+ in those days), whenever stocks started to go down, investors could move into bonds and they were rewarded.
Bonds
Should I Own Bond Funds Now?
Why do you own a bond fund? If you are like most folks that I talk with, it is because they are looking for some safety with their investments. After all, bonds are much safer than stocks, aren’t they? The only true answer to that question is; it depends! Safety in the bond market depends on how you own your bonds and what kind of bonds you own. The element that creates the perception of safety is the guarantee included in a bond. What most folks forget is the Guarantee on a bond‘s principal is only for one day! That is the day the bond matures. Until that day, the only thing guaranteed is the interest payment. The value of the actual bond will go up and down every day. For today’s discussion I am going to look specifically at bond mutual funds.
How Safe Are Your Bond Funds?
Do you own bond funds? Many investors and savers have flocked to bond mutual funds in their portfolios in the last 5 or 10 years, especially after the big stock and real estate drop in 2008. With bank rates on savings accounts and cd’s so low, it seemed to make sense to move that money into bond funds. After all, bonds are “safe” and you hardly earn any interest on bank based savings these days. If you went into bond funds for safety it’s probably time to take a second look! Here are 5 things you need to know about your bond funds.