Bond Funds That Perform
After the market problems of the past 3 years that invariably began with the weaknesses in the US credit system, a lot of investors have re-evaluated their risk tolerance and rediscovered the importance of a proper asset allocation model. In almost every case, investors watched their savings get shaved by half.
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.
The aggressive investor, however, also has had to revisit asset allocation with added emphasis on the income class, which aggressive investors have traditionally shunned from their portfolios in favor of more aggressive equity class investments.
Over the past decade or so, bond funds (which are part of the income class) have evolved tremendously. These funds now invest in high yield, below-investment grade investments that not only provide a greater income stream but can react with the same voracity as some equity class securities.
In fact, many high yield investments today are more volatile that many conservative equity funds, providing not only greater income stream and growth into the funds and to investors, but less overall risk than similar 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.
The better funds on the market will easily outperform the more-conservative equity funds. And with less trading within the fund, bond funds cost less to manage, resulting in greater savings for the investor seeking less risk. - 23223
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.
The aggressive investor, however, also has had to revisit asset allocation with added emphasis on the income class, which aggressive investors have traditionally shunned from their portfolios in favor of more aggressive equity class investments.
Over the past decade or so, bond funds (which are part of the income class) have evolved tremendously. These funds now invest in high yield, below-investment grade investments that not only provide a greater income stream but can react with the same voracity as some equity class securities.
In fact, many high yield investments today are more volatile that many conservative equity funds, providing not only greater income stream and growth into the funds and to investors, but less overall risk than similar 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.
The better funds on the market will easily outperform the more-conservative equity funds. And with less trading within the fund, bond funds cost less to manage, resulting in greater savings for the investor seeking less risk. - 23223
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posted by X - Men @ 5:00 AM
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