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Originally Posted by bloom2708
Whew. Lots of interesting comments about bond funds.It seems a lot of people look at the change in NAV (Net Asset Value) and use that as the gain or loss.
Bonds are for safety and some return. Many also take too much risk on the bond side. Use a good intermediate-term bond index (Total US, Int-Term Tax-Exempt) and up your stock percentage if you want more risk.
I hope in some of these threads the little nuggets of truth come through in the end.
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Yep! Certainly some seem to focus on NAV rather than total return.
It also seems that folks see the high returns in stocks and fixed income looks paltry in comparison. So which one is overextended?
In asset allocation it’s best to look at the whole and not worry about the parts in isolation.
We’ve been waiting for five years now for interest rates to rise and it’s just now happening after a brief scary in 2013 (which reversed quickly).
Personally, I hold cash, short-term bond index, and mostly high quality intermediate bond funds. I rebalance annually and otherwise don’t worry about it. While stocks are on a tear rebalancing builds up the bond allocation. High quality bond funds have done just fine during periods of rising interest rates and rarely go negative, and they shine when stocks are unhappy. If there is a negative year the next year gives a strong recovery. Look at benchmark AGG if you want to study history.
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