Tags: bond | investing | fund | Barclays

WSJ: 5 Common Misperceptions About Bond Investing

By    |   Monday, 24 February 2014 02:09 PM

After tumbling last year, bonds have rebounded in 2014, with the Barclays U.S. Aggregate Bond Index up 1.53 percent.

As you decide how to approach the market, The Wall Street Journal identifies five myths of bond investing.

1. "Bond investors will suffer huge losses when interest rates rise." That's not true for all bonds and bond funds, The Journal says. Ones with short durations will suffer smaller declines.

Editor’s Note:
5 Shocking Reasons the Dow Will Hit 60,000

2. "Investors who need income must own bond alternatives," such as real-estate investment trusts. "None of these things are substitutes for the safest bonds," Larry Swedroe, director of research at the BAM Alliance of investment advisers, tells The Journal.

3. "Municipal bonds and funds are safe diversifiers for a stock portfolio." The Journal recommends a national portfolio of munis as opposed to just bonds from your home state. If your state economy stumbles, that could harm both your employment situation and your home-state munis.

4. "Actively managed go-anywhere [bond] funds will outperform in a bad market." In the 12 months through Thursday, while the Barclays Aggregate Index has barely changed, non-traditional bond funds have lost 0.2 percent on average, according to The Journal.

5. "Individual bonds are better than bond funds." Bond funds actually provide more diversification and lower trading costs than investors can generally find through individual bonds.

Experts say bonds have an important role to play in your portfolio.

"It's not sexy, but fixed-income is still the most effective mitigator of equity risk," Jim Lauder, portfolio manager of the Wells Fargo Advantage Dow Jones Target Date mutual funds, tells The Associated Press.

"If you look at what happens when the world falls apart, other asset classes don't provide the same type of diversification benefits."

Editor’s Note: 5 Shocking Reasons the Dow Will Hit 60,000

Related Stories:

© 2019 Newsmax Finance. All rights reserved.

   
1Like our page
2Share
InvestingAnalysis
After tumbling last year, bonds have rebounded in 2014, with the Barclays U.S. Aggregate Bond Index up 1.53 percent.
bond,investing,fund,Barclays
326
2014-09-24
Monday, 24 February 2014 02:09 PM
Newsmax Media, Inc.
 

Newsmax, Moneynews, Newsmax Health, and Independent. American. are registered trademarks of Newsmax Media, Inc. Newsmax TV, and Newsmax World are trademarks of Newsmax Media, Inc.

NEWSMAX.COM
MONEYNEWS.COM
© Newsmax Media, Inc.
All Rights Reserved