We are only a little over half way through this year yet you have already taken investors on a very interesting ride. From posting impressive results through the first half of the year and then allowing volatility to enter the market through various headlines and worldwide economic news you’ve certainly kept us all on our toes.
As investors look at their portfolios and their performance results we have seen one alarming statistic over the last month and half. In June alone individual investors took over $80 billion dollars out of their bond positions! Investors moved out of their fixed income positions quickly due to rising interest rates and to chase the impressive returns that the equity markets have been posting. Bonds are often treated as the ugly stepchild of investing but we find that they are typically not truly understood by the majority of investors. Lets take a moment to get a better understanding on the basics of fixed income investing and more importantly how and why they have a place in your portfolio.
Bonds/Fixed Income 101:
In their most basic form bonds are essentially a promise to repay money, with interest, on a certain date in the future. Think of them as an IOU where the borrower is obligated to pay the lender (the investor) a specified amount of money at regular intervals and then to repay the principal amount at the bonds maturity date. There are several different types of bonds available in today’s market, the following bullet points will focus on the most common ones: Continue reading →
Every so often we come across an investment that grabs our attention. In this case we would like to turn the clock back a bit and revisit a time when the sky was falling and “Mr. Market” seemed to have it in for all of us regardless of where you tried to put your money. That was in 2008 and without reliving too many painful memories or details…let’s just simply refresh you on the performance of certain asset classes/indexes that year:
If you had any Bond exposure in your portfolio that’s probably all that you had to celebrate as they at least turned in a positive +5.24%. Most people realistically didn’t have enough Bond exposure but flocked to them in 2009. They were rewarded with another positive year with +5.93%. The problem with that, however, is that the areas they just cut bait on (stocks) returned the following: