Bond Funds That Perform
Investment management has become an all-important component to investing, particularly after the past 3 years since the collapse of the US credit system. A lot of investors have taken a good, hard look at their asset allocation model and determined that their risk tolerance might be a lot lower than they might have originally believed.
Those dark market days that tested new lows and personal strength pushed the ideals of risk tolerance to the surface and made both conservative and aggressive investors alike realize that risk tolerance has to be paramount. For conservative investors, that has meant no longer being able to rely on term deposits and treasuries to contribute to the growth of an investment portfolio.
For the aggressive investor, the implications were probably more grave. It meant proper diversification needed to take center stage. That meant finding opportunities in the income class, a class that might have been ignore completely in the past.
The income class of a decade ago is not the same as the class today. In fact, today's bond funds have explore greater options for income and capital appreciation than their historic counterparts. High yield investments combined with greater-volatility debt means some of these bonds respond to market triggers the way some equities do.
The reality is that these high yield investments can be more volatile and provide more income that some of the more conservative equity funds. And the most interesting (or important, depending on your position) is that these bond funds incorporate considerably less real risk than equity funds.
In taking a look at both bond and equity funds, the lower real risk will always be with the bond funds. Where there has been a problem is in the rating companies like Moody's and Standard & Poor's, both of which came under scrutiny during the CDO collapse of 2007 and 2008. What was once an investment-grade bond two years ago is now a B rated and with the spread between government and corporate having widened over the years, only the investor stands to benefit.
Some of the best bond funds will generate returns far greater than conservative equity funds. Expenses are low because trading is lower. Overall, bond funds can provide better returns than equity funds, with less risk. They are clearly worth considering. - 23222
Those dark market days that tested new lows and personal strength pushed the ideals of risk tolerance to the surface and made both conservative and aggressive investors alike realize that risk tolerance has to be paramount. For conservative investors, that has meant no longer being able to rely on term deposits and treasuries to contribute to the growth of an investment portfolio.
For the aggressive investor, the implications were probably more grave. It meant proper diversification needed to take center stage. That meant finding opportunities in the income class, a class that might have been ignore completely in the past.
The income class of a decade ago is not the same as the class today. In fact, today's bond funds have explore greater options for income and capital appreciation than their historic counterparts. High yield investments combined with greater-volatility debt means some of these bonds respond to market triggers the way some equities do.
The reality is that these high yield investments can be more volatile and provide more income that some of the more conservative equity funds. And the most interesting (or important, depending on your position) is that these bond funds incorporate considerably less real risk than equity funds.
In taking a look at both bond and equity funds, the lower real risk will always be with the bond funds. Where there has been a problem is in the rating companies like Moody's and Standard & Poor's, both of which came under scrutiny during the CDO collapse of 2007 and 2008. What was once an investment-grade bond two years ago is now a B rated and with the spread between government and corporate having widened over the years, only the investor stands to benefit.
Some of the best bond funds will generate returns far greater than conservative equity funds. Expenses are low because trading is lower. Overall, bond funds can provide better returns than equity funds, with less risk. They are clearly worth considering. - 23222
About the Author:
Chris is the founder of the MutualFundSite.org, a website dedicated to Investment Management as well as Mutual Funds.
posted by X - Men @ 4:59 AM
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