A problem in mutual funds are individual investors being accused of chasing performance. Chasing performance is when an investor goes into the market sector that has been hot in the past. In taxable bond funds more than $32.6 billion dollares has been spilled out through October. Both taxable and non-taxable funds , the outflows so far represent about six percent of each category assets at the start of this year.
Technology stocks alone have lost over twenty percent, and some have produced total returns in the vicinity of ten percent. There are many good reasons why many investors will remain unappreciative of bond funds. The people who think that bonds are simply uncool in the context of a diversified investment portfolio may want to reconsider n the wake of this years peformance. The investors that have pilled up into bond funds have learned that “total return” in the bond market cuts both ways. Looking for a long term bond at 6%, but the newly issued bonds at 8%, lower yelding bonds are worth less in the market.
The investors that have the long term savings in their retirement accounts, and who are picking whether to make changes in the upcoming years, should pay attention to the next ten years because the odds are that longer term bonds will return more then short term accounts.