But there's not much you can do about that. There's no doubt they're falling short on the income front these days what with two-year, five-year and 10-year Treasuries recently yielding a bit over 0.5%, 1.3% and 1.9%, respectively, with investment-grade corporates paying a bit more. Basically, they provide two things: income and ballast.
ANOTHER NAME FOR OUTGUESS HOW TO
Related: How to avoid outliving your retirement savingsįor starters, you should step back a moment and think about why bonds should be part of a long-term investing strategy in the first place. So, if you're concerned about bonds, what should you do? The broad bond market has sagged occasionally - it lost 4.5% over the course of four months in 2013 - but it recovered nicely and has largely defied doomsayers' prognostications, returning an annualized 4.4% the past five years.Īs for trying to predict how bonds of different maturities might perform relative to one another when rates eventually rise, I think a paper titled " Reducing Bonds? Proceed With Caution" that Vanguard published in 2013 sums it up nicely: "Interest rate movements tend to follow a 'random walk' and to be driven by 'new' economic events, thus making interest rate predictions little more than guesswork." Or to put it another way: Trying to outguess or time the bond market makes about as much sense as trying to outsmart the stock market - none. Pundits and various other bond gurus have been predicting that rising rates would inevitably wreak Armageddon in the bond market for some five years now and it hasn't happened.
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