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Bond Outflows

There is a lot of confusion in the markets right now with investors seemingly undecided about what to do with their bond holdings. Do they sell now and lock in profits or do they hold positions and risk losing principle as yields rise.

Here is an article by Olly Ludwig of IndexUniverse.com- Bonds ETF Outflows Spikes as Rates Rises, pointing out that investors have been pulling money out of exchange-traded bond funds in record amounts due to the Fed's quantitative easing, which may suggests that higher interest rates may be a bad thing for bond investors.

However, Anthony Mirhaydari, of MSN Money in his article- Why higher rates are a good thing, makes the point that quantitative easing may be just what the markets need to get back to that level of competitive free markets.  Mr. Mirhaydari makes the argument that the markets have been artificially propped up for too long, lulling many investors into a false sense of stable fixed-income return expectations.

No matter your point of view or preference on whether to buy or sell bonds now, we suggest that investors take a careful approach to bond buying over the next six months by sticking to investment grade issues or just holding back on new purchases for at least the next 6 months until clearer interest rate trends develops.

Tip of the Week: Take advantage of the tax-deferred benefits of a Roth. A Roth account is a great account for estate planning. Your money grows tax-deferred and passes tax-free to your heirs. Call us for free consultation at 1-866-801-3359 to speak with a consultant today.



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