Bond Funds/Conservative allocation

[Anonymous]

Bond funds have returned negatively this year and the general consensus seems to be that this may continue for a while.
Can anyone explain the reason?

Thank you.

[Anonymous]

If you have a 10 year bond that pays 1.5% interest, and new bonds being issued pay 2% interest then no one wants to buy your bond at face value. For that reason, the value of a bond fund will usually decline as interest rates rise, although the amount of the decline will usually depend on how much time is left on its bonds (the "average duration").

[Anonymous]

Thanks. Would it be best to leave the money in the bond funds or move elsewhere?
I already have money in stocks & growth mutual funds. Thanks

[Anonymous]

Interest rates are expected to rise in mid- to long-term (it's too low now) so that the bond prices will fall.
Not a good time to invest in bond funds.

[Anonymous]

You need to have an investment allocation that you are comfortable with and you have reasons for, not simply because you think stocks are going up/bonds are going down right now.

If you have one, stick with it. If you think there are reasons to change it, be very careful that they are good ones and not just a camouflaged version of "stocks are going up/bonds are going down".

[Anonymous]

Not OP, but I have a chunk of money to invest and wanted 65% stock fund and 35% bond fund. But I feel sort of ridiculous buying a bond fund now when it's almost a certain loss. What else can make up the "conservative" portion of the relatively conservative portfolio?

[Anonymous]

Anonymous wrote:Not OP, but I have a chunk of money to invest and wanted 65% stock fund and 35% bond fund. But I feel sort of ridiculous buying a bond fund now when it's almost a certain loss. What else can make up the "conservative" portion of the relatively conservative portfolio?

1) paying down mortgage on a house
2) CDs
3) I bonds
4) buying actual short term treasury bonds
5) do a Roth rollover on non Roth funds
6) prepaid college tuition, if appropriate

[Anonymous]

Anonymous wrote:

Anonymous wrote:Not OP, but I have a chunk of money to invest and wanted 65% stock fund and 35% bond fund. But I feel sort of ridiculous buying a bond fund now when it's almost a certain loss. What else can make up the "conservative" portion of the relatively conservative portfolio?

1) paying down mortgage on a house
2) CDs
3) I bonds
4) buying actual short term treasury bonds
5) do a Roth rollover on non Roth funds
6) prepaid college tuition, if appropriate

. We've done all except 1 and 3. Maybe it's time to payoff the mortgage. Thanks.

[Anonymous]

i-bonds got a bump in interest rates this month-- I think they are a great option.

I think bond funds are still fine, although I'd probably stick to short or mid term ones, where the increase in interest can offset the loss of value. Everyone has been saying interest rates will go up for the last 10 years and there's only been really one bump so far.

[Anonymous]

bonds are fine don't believe the hype