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.
Ever since those bleak days in 2007, 2008, and again in March 2009, the concept of risk tolerance has taken on a brand-new meaning for aggressive and conservative investors alike. For the conservative investors, it meant that maintaining growth could no longer be found in bank-issued term deposits or government issued treasuries.
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.
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. - 23311
Ever since those bleak days in 2007, 2008, and again in March 2009, the concept of risk tolerance has taken on a brand-new meaning for aggressive and conservative investors alike. For the conservative investors, it meant that maintaining growth could no longer be found in bank-issued term deposits or government issued treasuries.
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.
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. - 23311
About the Author:
Chris is the founder of the MutualFundSite.org, a website dedicated to Investment Management as well as Mutual Funds.
posted by Mr. Forex at
6:46 AM
0 Comments:
Post a Comment
Subscribe to Post Comments [Atom]
<< Home