Things seem very quiet here with our long time denizen on an exten (ded??) (sive??) absence. I'll take a crack at keeping thread from dying out by posing this question: Should one buy, hold, or sell their bond funds ? My quick answer is- "it depends". Depends on several factors, not the least of which is whether you already have bond funds, or you don't have any bonds, but are thinking of getting some.
Before I delve further into this, I'll acknowledge that interest rates are at an all time low. Great if you're getting a loan, stinks if you're a saver. (Glancing at todays money section shows average 1 yr. CD yield to be 0.25%. That is a lousy $25 for $10K invested.).
If you look at bond yields, they look more attractive than bank/CD, but come with risks. One being the risk of default. Which is one reason why more people own bond funds than buy an individual bond - spreads out the risk more. Another downside is interest rate fluctuation effect on bond price. The longer the time to bond maturity (aka- term), the greater the fluctuation. If interest rates rise higher than your bond yield, the price will go down. Sometimes, the interest paid by bond is insufficient to offset the price erosion. Conversely, having interest rates decline to lower than your bonds yield will result in higher bond price ( and a capital gain if you sell the bond, or fund shares.)
S-o-o-o: With interest rates at all time lows, the potential for price appreciation is essentially nil, but with downside risk whenever interest rates rise. In the short term, I'd say bonds are a "hold". (Disclaimer- I am not a financial advisor. I am not a meteoroligist either, but I feel a certain confidence in telling people whether or not to bring a coat for a proposed visit to Chicago.). For someone who doesn't already own a bond fund, they'll probably do "OK" . (One short term bond fund yield in the last year has mostly been in the ~1.7% - 1.9% range with a price range fluctuation of 4c/share, share price ~ $5). The big question is, how much longer can rates stay this low ? They don't show signs of rising anytime soon. I've been privately singing "rates might rise in a couple of years" for the last 3-4 years. I won't delve into the hows and whys that the rates are this low, except to be prepared to sell whenever rates rise, and buy more shares (lower cost average) after selling.
Your turn, Eric, etal.



I don't sweat
the other 5% .......................
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