Bond mutual funds?

[rayray]

I was wondering about your thoughts on bond mutual funds, specifically in retirement accounts?

I have two bond mutual funds in my kplan, Pimco Total Return and Pimco Real Return.

Personally, I have mixed emotions about bond funds. Right now, the yields are at their lowest while their prices of the funds are at some of their highest. In other words, you're spending a lot of money for very little yield, taking on a lot more risk then one realizes. I worry about the herd mentality, the bond bubble and that if there was to be a market correction, or recession that these bond funds might not be as protective as one might assume, completely negating the phrase, "No one appreciates bonds until a market downturn."

I'm not talking about regular bonds, just your opinions on bond mutual funds.

I've been thinking about bailing on them.

[crimsonghost747]

I'm not a big fan. In the very early days of investing everyone learns that, in general, bonds are the safe alternative and stocks are the dangerous one. Even a lot of the mutual funds which I see have a "safe" portion made out of bonds and a "risky" portion made out of stocks. But I don't see bond funds as a low risk option right now, certainly not. Interest rates really can't go much lower, so it's unrealistic to think theses funds would go much higher. Also, the FED will raise rates at some point.

So I would certainly stay away from bond funds for now. Like you said, high price and low yield... now this would mean that in order for it to be a sensible investment it should have great growth potential. Do bond mutual funds really have that? Especially in the current environment?

I only own individual bonds, they are much safer as my plan is to hold until maturity. (so basically I've already locked in the profits, as long as the company is capable of paying back the principal)

[rayray]

(11-06-2016, 12:46 PM)crimsonghost747 Wrote: ...high price and low yield... now this would mean that in order for it to be a sensible investment it should have great growth potential. Do bond mutual funds really have that? Especially in the current environment?

Crimson, right here you hit the nail on the head.