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Are 30% of bond funds riskier than they appear? Three finance professors say yes. Morningstar disput
Are 30% of bond funds riskier than they appear? Three finance professors say yes. Morningstar disputes their findings.
There’s a big problem in the multi-trillion-dollar bond market, according to a recent National Bureau of Economic Research working paper: A substantial portion of bond funds might be riskier bets than they seem.
If course everything is risky except CDs. Many bonds and funds went down significantly in 08_09 crash
Treasuries are, at least on paper, less risky than CDs. The former are directly backed by the full faith and credit of the US Treasury which issues the bonds. CDs are issued by banks that can fail, and are usually insured (within limits) by the FDIC. Though it is the "sense of Congress" that the FDIC has the full faith and credit backing of the Treasury, this has not been tested.
Treasuries went up significantly in the 08_09 crash. As I suspect CDs did, if they were marked to market (though perhaps not). See chart comparing S&P 500 and Treasuries here. (S&P 500 down 43%, Treasury bonds and VUSTX up 9%.)
Interest Rate Changes. Interest rate increases can cause the price of a debt security to decrease. Foreign Exposure. Foreign markets can be more volatile than the U.S. market due to increased risks of adverse issuer, political, regulatory, market, or economic developments and can perform differently from the U.S. market.
Prepayment. The ability of an issuer of a debt security to repay principal prior to a security's maturity can cause greater price volatility if interest rates change. Issuer-Specific Changes. The value of an individual security or particular type of security can be more volatile than, and can perform differently from, the market as a whole. A decline in the credit quality of an issuer or a provider of credit support or a maturity-shortening structure for a security can cause the price of a security to decrease. Lower-quality debt securities (those of less than investment-grade quality, also referred to as high yield debt securities or junk bonds) involve greater risk of default or price changes due to changes in the credit quality of the issuer. The value of lower-quality debt securities can be more volatile due to increased sensitivity to adverse issuer, political, regulatory, market, or economic developments.
Leverage Risk. Leverage can increase market exposure, magnify investment risks, and cause losses to be realized more quickly. An investment in the fund is not a deposit of a bank and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Unlike individual debt securities, which typically pay principal at maturity, the value of an investment in the fund will fluctuate. You could lose money by investing in the fund.
Performance The following information is intended to help you understand the risks of investing in the fund. The information illustrates the changes in the performance of the fund's shares from year to year and compares the performance of the fund's shares to the performance of a securities market index over various periods of time. The index description appears in the "Additional Index Information" section of the prospectus.
Past performance (before and after taxes) is not an indication of future performance. Visit www.fidelity.com for more recent performance information. Year-by-Year Returns
Comments
Treasuries went up significantly in the 08_09 crash. As I suspect CDs did, if they were marked to market (though perhaps not). See chart comparing S&P 500 and Treasuries here. (S&P 500 down 43%, Treasury bonds and VUSTX up 9%.)
FCBFX - FIDO CORPERATE BOND FUNDS BOILER PLATE
Interest Rate Changes. Interest rate increases can cause the price of a debt security to decrease.
Foreign Exposure. Foreign markets can be more volatile than the U.S. market due to increased risks of adverse issuer, political, regulatory, market, or economic developments and can perform differently from the U.S. market.
Prepayment. The ability of an issuer of a debt security to repay principal prior to a security's maturity can cause greater price volatility if interest rates change.
Issuer-Specific Changes. The value of an individual security or particular type of security can be more volatile than, and can perform differently from, the market as a whole. A decline in the credit quality of an issuer or a provider of credit support or a maturity-shortening structure for a security can cause the price of a security to decrease. Lower-quality debt securities (those of less than investment-grade quality, also referred to as high yield debt securities or junk bonds) involve greater risk of default or price changes due to changes in the credit quality of the issuer. The value of lower-quality debt securities can be more volatile due to increased sensitivity to adverse issuer, political, regulatory, market, or economic developments.
Leverage Risk. Leverage can increase market exposure, magnify investment risks, and cause losses to be realized more quickly.
An investment in the fund is not a deposit of a bank and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Unlike individual debt securities, which typically pay principal at maturity, the value of an investment in the fund will fluctuate. You could lose money by investing in the fund.
Performance
The following information is intended to help you understand the risks of investing in the fund. The information illustrates the changes in the performance of the fund's shares from year to year and compares the performance of the fund's shares to the performance of a securities market index over various periods of time. The index description appears in the "Additional Index Information" section of the prospectus.
Past performance (before and after taxes) is not an indication of future performance.
Visit www.fidelity.com for more recent performance information.
Year-by-Year Returns