In the most recent quarter, however, the competition was less fierce because investors were pulling
money from bond funds.
Based on this data, it is safe to say that recent
withdrawals from bond funds have had minimal impact on broader markets and liquidity.
However, you'll then be receiving an even lower interest
rate from the bond fund, but you would continue to receive the higher rate from the CD.
If you want to get your money
back from a bond fund, you'll have to sell your shares and accept their current market value.
Next, dividends are more of a fixed income thing than an equity fund thing, so the vast majority of dividends will
come from the bond funds.
Like many other value investors, I expect this to continue for the immediate future, expecting actual
losses from bond funds.
I use the
dividends from the bond funds and use them to automatically invest in the s & p 500 fund, so I am working to increase the amount I put in the bond funds for «safety» and using the yields to buy the stock fund.
You will never hear about this risk
from bond fund managers (think Pimco, whose employees all seem to follow the party line) or researchers that work mainly for bond guys (Bianco).
I've earned
more from my bond funds over the last 6.5 years than I have from my CDs, but that's mostly due to the credit risk being rewarded, with less contribution from the term risk (I haven't used Treasury funds).
If a fund returns at 3.5 % and the fund's benchmark returns 4.0 %, there would be massive
outflows from that bond fund and everyone would assume the fund managers were trash!
Here's a
reminder from Bond Fund Performance During Periods of Rising Interest Rates: Some observations up - front: - There are only 500 or so money market funds.
Throughout the year fund managers buy and sell bonds in their portfolios and interest rates change, so the return
from a bond fund fluctuates from month to month.
While most of the above mentioned options are for long - term investing, if you are looking to make short - term investments while seeking investment options, you can always
choose from bond funds, short - term funds, fixed deposits and the likes.
Investors began to withdraw money
from bond funds as interest rates continued their climb in June.
So if you receive a
dividend from a bond fund, instead of adding it to that bond fund, the software looks for an area where you might be low, say a stock fund, and automatically invests the money there.
While each product offers investors an array of options, the characteristics that distinguish a
bond from a bond fund can help determine which fits best with your financial objectives.
Investors who want to beef up the returns they
get from their bond funds can also do so by placing them inside tax - deferred accounts or plans such as traditional or Roth IRAs, qualified plans or variable annuity contracts.
So begins a research paper * by Richard Haghani, founder and chief executive of Elm Partners, and Richard Dewey,
from bond fund manager Pimco.
Bond fund withdrawals might have had a greater effect on markets where there is less trading, such as municipal securities — but even there,
redemptions from bond funds would have accounted for less than 10 percent of the primary dealers» trading.
Income - producing investment ideas you can act on,
from bond funds to high - yield stocks - includes the Motley Fool Options service
Now we can see that $ 1 in «dividends» (really, interest payments)
from a bond fund or individual bond will be less than $ 1 in qualified dividends from a stock or stock fund after taxes.
Income - producing investment ideas you can act on,
from bond funds to high - yield stocks - includes the Motley Fool Options service
However, all income that is drawn out of traditional plans and accounts will be taxed as ordinary income, so any interest that is paid to
you from bond funds via distribution will still be taxed.