September Newsletter – Should You Move Your Money Out of Bonds?

Should You Move Your Money Out of Bonds?

9.13 US Bond IndexIn the last four months we have seen some of the worst bond performance in history, and the volatility and potential downside has been a cause for concern for many of our clients.

Figure 1 shows the performance of a typical US Bond Index Fund used in many portfolios, and the unusual downward sloping, saw-tooth line is to blame for the heightened anxiety of late.
There are a couple of very important things we want to emphasize with respect to the bonds that are in your portfolio:

  1. You do not own bonds directly; you own shares in a bond mutual fund. Shares purchased in May have gone down in value, but no money is lost money unless the shares are sold. If you still own them, they have the potential to increase in value in the future. So, when you hear the “experts” discuss bonds, if they are not talking specifically about bond funds, then their discussion probably doesn’t apply to your portfolio.
  2. A retirement portfolio must be viewed as a long-term investment. Reacting to market volatility with short-term solutions will usually hurt long-term gains. Figure 1 represents three months of this fund’s performance. Now look at Figure 2, which shows the same fund over the last three years. When we take a longer perspective, short-term volatility can be less stressful.

9.13 US Bond Fund


Valuation Based Equity Market Forecasts

Selected Charts from Adam Butler, Mike Philbrick and Rodrigo Gordillo: Source Link

 9.13 Rolling 15 Yr Predicted vs Actual Real Total Returns

9.13 Comparing Long term average forecasts with model forecasts

Click Here to Download the PDF Version