Anonymous
02/17/2013 23:43
Subject: Talk to me about bond funds.
I think buying individual bonds would be a safer bet than a bond fund which can go up and down just like stock funds. Of course I'd be loath to do that unless you had $15-$20k to play with.
There are several closed-end mutual funds from Blackrock and other companies that (1) trade just like stocks and (2) will return a guaranteed $10, $25, or whatever the IPO price was to the holder at some date in the future.
Term trusts I think they are called and I guess they represent a big pile of municipal bonds. In the interim, they spew out dividends which are the interest from the bonds.
Of course the risk is that Blackrock or whoever goes under in the interim in which case you're out, and of course Blackrock or whoever will take their bite.
But talk to an investment advisor about those. They are a way a smaller investor can get into municipal bonds with some guarantee of a return.
There are several closed-end mutual funds from Blackrock and other companies that (1) trade just like stocks and (2) will return a guaranteed $10, $25, or whatever the IPO price was to the holder at some date in the future.
Term trusts I think they are called and I guess they represent a big pile of municipal bonds. In the interim, they spew out dividends which are the interest from the bonds.
Of course the risk is that Blackrock or whoever goes under in the interim in which case you're out, and of course Blackrock or whoever will take their bite.
But talk to an investment advisor about those. They are a way a smaller investor can get into municipal bonds with some guarantee of a return.
Anonymous
02/15/2013 12:12
Subject: Talk to me about bond funds.
Agree with PPs that bonds have been on a long bull market and you definitely should NOT make investment decisions looking in the rear window.
That said, people have been saying that bonds are going to collapse beginning at least in 2010, and if you listened then, you'd have missed out on a few years of good gains.
Personally, I think that bonds play a role in a long term asset allocation strategy. Given the interest rate situation, we are a bit wary, but are still holding onto our bond funds, especially in our retirement accounts. (We try to be relatively tax efficient and keep more equity funds in our taxable accounts, and bonds in our tax deferred accounts.)
If you feel that you are "overexposed" to equities, consider whether you are just concerned about your overall asset allocation. If so, you could always pull some back into a cash emergency fund.
That said, people have been saying that bonds are going to collapse beginning at least in 2010, and if you listened then, you'd have missed out on a few years of good gains.
Personally, I think that bonds play a role in a long term asset allocation strategy. Given the interest rate situation, we are a bit wary, but are still holding onto our bond funds, especially in our retirement accounts. (We try to be relatively tax efficient and keep more equity funds in our taxable accounts, and bonds in our tax deferred accounts.)
If you feel that you are "overexposed" to equities, consider whether you are just concerned about your overall asset allocation. If so, you could always pull some back into a cash emergency fund.
Anonymous
02/14/2013 14:29
Subject: Talk to me about bond funds.
I also mostly agree with PP. The main point to remember is that an individual bond is a promise to pay you principal and interest, so as long as there is default on the bond (i.e., the company/govt goes bankrupt and can't pay you) you are guaranteed that money.
On the other hand, a bond fund is a collection of bonds, and the value of those bonds is largely determined by whether the interest rate on the bonds you own is higher or lower than current interest rates. So the value of a bond fund is driven up and down by changes in interest rates.
It is true that bonds are on a long bull market and nothing goes up forever....
On the other hand, a bond fund is a collection of bonds, and the value of those bonds is largely determined by whether the interest rate on the bonds you own is higher or lower than current interest rates. So the value of a bond fund is driven up and down by changes in interest rates.
It is true that bonds are on a long bull market and nothing goes up forever....
Anonymous
02/14/2013 13:34
Subject: Talk to me about bond funds.
I agree w PP, though I'm not sure I'll sell because my strategy generally is to hold long term (I'm 20+ years away from retirement).
Anonymous
02/13/2013 23:36
Subject: Talk to me about bond funds.
Anonymous wrote:I noticed recently that DH's index bond fund in his retirement account is doing very well. I'm considering putting some money I have in an IRA in a bond fund while we see what happens with the stock market, plus I think we are over-exposed in stocks anyway. Does anyone have any advice? Am I talking out of my butt? Discuss, discuss.
Short discussion. You are looking in the rear view mirror. Sell DH's bond fund, now. Do not put any money in a "bond fund." Buy individual, well-selected bonds if you must. Interest rates can not possibly go any lower than they are now. If they do, it will be marginal and (very) temporary. Bonds will be crushed when rates rise. Never, ever look in the rear view mirror when it comes to money.
Anonymous
02/13/2013 19:53
Subject: Talk to me about bond funds.
I noticed recently that DH's index bond fund in his retirement account is doing very well. I'm considering putting some money I have in an IRA in a bond fund while we see what happens with the stock market, plus I think we are over-exposed in stocks anyway. Does anyone have any advice? Am I talking out of my butt? Discuss, discuss.