avoid these 3 bond funds when rates rise

johnN

https://www.investorsalley.com/avoid-these-3-bond-funds-when-interest-rates-rise/?t=tdhlandjoe36mtmc&utm_source=marketcap&utm_medium=article&utm_campaign=tdh36monthplan


"Avoid These 3 Bond Funds When Interest Rates Rise
Bonds, Interest Rates, Stocks to Avoid
September 17, 2018 6:15 am by Tim Plaehn



Are bond funds a safe haven if the stock market crashes?

With interest rates about to rise, is it a good time to invest in a bond fund?

These are questions investors may be asking themselves as the stock market may be peaking and the Fed keeps jacking up interest rates. If you are fearful of what may happen in the stock market, you may also be considering putting money into one of the popular bond ETFs. Read further to understand that a bond fund comes with its own set of risks, ones that the financial services industry won’t tell you about."

Junkster

John, you have been asked before over the years by several on the board, but please try to be like Ted if you are going to post links. Meaning, give a brief synopsis of what the link is about. Otherwise, thanks for your efforts In ferreting out news worthy stories.

Old_Skeet

@johnN,

John I would have read this link but since you provided no blurb about it ... I passed.

Ben

1) The author of the linked article wrote
" The only thing that will cash a bond fund’s price to increase is declining interest rates. This means in an extended period of rising rates; bond fund investors will see their principal decline without the possibility of a recovery."

I assume that the 5th word "cash" is a typo for "cause". But even when the typo is corrected the sentence does not square with what I've observed over time. When interest rates rise the bond fund will invest in the higher yielding bonds that appear. The investor in the bond fund gets a higher interest rate on these bonds. While there have been years of loss ("negative return") I have never had my principal decline in a bond fund. For one thing all interest and capital gains are being used to automatically buy more shares in the fund. I invest in bond funds as a counter-balance to investments in stock funds. I'd be wary about using a bond fund to generate income. For that I have bought single bonds through a reliable broker.

2) The title of this post was sufficient for me to get an inkling of what the linked article was about. For me, unattributed replication of the first lines of an article is not more helpful than no blurb at all. Ted copies and pastes the first sentences of the linked articles. As often as not these first sentences have been written to establish a basis for understanding the main thrust of the article. They are not a synopsis of what follows.

3) None of the above should be taken to mean that I have not benefited from some of the articles linked by Ted, John, or others. I have. And I appreciate the public service, and the time & effort . It would be even better if when someone posts a link they write a few words of their own about what the article is about and why they find it worthy of attention.

Ted

@Ben: Appreciate your positives comments, and will try and add some of my thoughts to some my links.
Some of our members don't realize or care the thousands of hours I have spent here at MFO and FundAlarm trying to enhance the knowledge about fund investing to our members. As long as I am able, along with others, I will try and make the MFO Discussion Board the web's best source of information about mutual funds, ETF, and investing in general.

MFO has over two thousand members, and I'm not about to let four or five dead beats intimidate me, when the owner of MFO, David Snowball, has told me how much he appreciates my efforts.
Regards,
Ted

Old_Joe

Nobody is trying to "intimidate" you, @Ted. Just play by the rules that everyone else does and you can post whatever you want to.

By the way, if would you like me to post the PayPal receipts for my "deadbeat" donations this year, I'll be happy to.