What Bond and Bond Fund Investors Need to Know Now
The outlook for traditional bonds and bond funds doesn’t look great with historically low yields today, and perhaps even lower yields and values on the horizon.
“Our concern today is that people are putting a lot of money into traditional bond funds, seeing the income that these bond funds produce,” says Jim Bernard, CFA, senior vice president and director of fixed income portfolio management, as well as an investment advisor representative at Ancora Advisors LLC.
However, that income is already falling and Bernard says it is going to continue to drop significantly.
“On top of that, the net asset values of these funds will be falling as the bonds they hold move closer to maturity because values today, in many cases, are significantly higher than the face value at which the bonds will pay off,” he says.
How does the traditional bond market work?
What do low interest rates and falling bond yields mean for investors?
What is the difference between owning an individual
bond and a bond fund?
What can we expect from bond funds in the future,
and what should investors in bond funds do now?
- Master limited partnerships, which pay a rate of interest through the infrastructure of the U.S. energy system, pipelines, etc.
- Certain real estate investment trusts, where income is derived from real estate projects.
- Certain sovereign bonds, which are non-U.S. government bonds and offer a way to diversify from the U.S. dollar.
- Merger arbitrage funds, which have bond return characteristics but are invested in equities.